Home / Economy / India poised for faster recovery in next three quarters: Finance Ministry

A broad-based rebound in several leading macroeconomic indicators in July and August offer bright prospects for India’s continued economic recovery, the finance ministry in a report.

"With government and RBI’s unflinching commitment to put the economy back on track, India is poised for an even faster recovery in the next three quarters of 2021-22. Rapidly increasing vaccination coverage and richer experience with pandemic management provide the confidence that the recovery can be continued even in the event of a third wave," said the Department of Economic Affairs in the monthly economic review for August.

Recent economic data showed India's economy grew at a record 20.1% year-on-year in April-June quarter, rebounding from a deep slump last year, in spite of a devastating second wave of COVID-19 cases. The economy had contracted 24.4% in the same quarter a year earlier.

On Wednesday, S&P Global Ratings said India is expected to post strong economic growth in the coming quarters, even as inflation, led by food prices, is likely to remain elevated. The economy is expected to clock 9.5% growth in the current fiscal year, followed by 7% expansion in the next year, it said.

Earlier this month, Morgan Stanley maintained its estimate of India GDP growth at 10.5%  for FY2022. "We expect economic activity to start normalising from quarter ending September, supported by pent-up demand, ramp-up of the vaccination drive, favourable policy mix and robust global growth," it said in a research report.

However, said Morgan Stanley, key risks to watch are the pace of vaccination (any slowdown could increase risks) and the trend in Covid-19 cases -- potential re-acceleration, threat from new variants and restrictions on activity.

“The second wave impacted Q1 output of FY 2021-22. Nonetheless, the output has been large enough to post a YoY growth of 20.1% recovering more than 90%of the pre-pandemic Q1 output of 2019-20," the report said. 

The finance ministry in its report said: “The broad-based swift recovery of both demand and supply side components to prepandemic levels as reflected in Q1:FY 2021-22 estimates bear testimony to India’s strong macroeconomic fundamentals, barely shaken in FY 2020-21 amid the worst pandemic of the century. In fact the macroeconomic fundamentals are stronger in FY 2020-21 amid a ravaging COVID-19 pandemic as compared to 2008-09 when the Global Financial Crisis (GFC) had pulled down the world economy into recession." 

In addition, government’s capex push to crowd-in private investment and financial sector clean-up will further support growth, it added. 

With the ebbing of second wave and easing of local restrictions along with rapid progress in vaccination, retail activity mobility has improved significantly in August. However, experts have expressed caution against potential third wave with the festive season starting in September. 

The ministry also said that India needs to continue to hold its strong guard against COVID -19 and retain its focus on testing, tracking, adopting Covid appropriate behaviour and vaccinating to contain a possible new surge. 

Pointing out at the robust recovery in tax collections, the finance ministry said it augurs well for government to provide the required budgeted support to the economy. 

"Sustained robust growth in E-way bills generated since the peaking of second wave signals healthy revenue collections and restoration of supply chains throughout the country aided by removal of local restrictions on movement of people and goods, it added. 

Confidence in India’s fundamentals is further reflected in buoyant domestic equity markets with BSE Sensex and Nifty 50 scaling record highs in August, the ministry said. 



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