OPEN APP
Home / Economy / Strong fundamentals, structural reforms will help drive growth: FinMin

Strong fundamentals, structural reforms will help drive growth: FinMin

With forex reserves more than twice the level in FY21 than in FY09, aided by a tenfold increase in FDI from $8.3 billion to $80.1 billion and large net FPI inflows unlike the outflows earlier, a much greater conviction about India’s high potential growth is evident among global investors. (Photo: Mint) Premium
With forex reserves more than twice the level in FY21 than in FY09, aided by a tenfold increase in FDI from $8.3 billion to $80.1 billion and large net FPI inflows unlike the outflows earlier, a much greater conviction about India’s high potential growth is evident among global investors. (Photo: Mint) 

  • The finance ministry said besides immediate relief measures to save lives and livelihoods, India is the only country to have undertaken supply-side structural reforms, lending flexibility and resilience to supply chains at the initial stages of the pandemic itself

NEW DELHI : India is poised for an accelerated economic recovery, both in the short and long term, on the back of strong macro-economic fundamentals supported by structural reforms that enable enhanced efficiency and productivity, the finance ministry said in its latest Monthly Economic Review.

“A broad-based rebound in several leading macroeconomic indicators in July and August offer bright prospects for India’s continued economic recovery. With government and RBI's (Reserve Bank of India) 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," the report released by the Department of Economic Affairs said.

The report said government’s capex push to crowd-in private investment and financial sector clean-up will further support growth. “In particular, the contact-intensive services sector prepares for revival as rapid progress in India’s vaccination drive aided by targeted relief measures for stressed sectors strengthens demand," it added.

Meanwhile, total expenditure declined 4.7% during the first four months of FY22 and stood at 28.8% of budgeted estimate. Revenue expenditure during this period fell 7% despite a 14.7% increase in major subsidies, indicating re-prioritisation of revenue expenditure to meet the fiscal targets. However, capital expenditure registered a 14.8% growth during April-July period. The key sectors where capex has increased during these months are road transport, highways, railways and housing.

The finance ministry said besides immediate relief measures to save lives and livelihoods, India is the only country to have undertaken supply-side structural reforms, lending flexibility and resilience to supply chains at the initial stages of the pandemic itself. 

"These reforms are intended to bolster the productive capacity of the economy, create wealth and jobs especially at the bottom of the pyramid and place India on a sustainable high-growth path in the medium to long run. The recent decision in the Monsoon Session to repeal the retrospective tax amendment of year 2012 reflects the commitment of government towards providing a stable and predictable tax regime for all stakeholders," it added.

The report said with the ebbing of second wave and easing of local restrictions along with rapid progress in vaccination, retail activity mobility has improved to (-) 16.3% in August from (-) 24.6% of baseline estimates in July. “However, experts have expressed caution against potential third wave with the festive season starting in September. While studies show that vaccines are effective in reducing disease severity, possibility of hospitalisation, and also avoiding death to tune of 98-99%, they do not prevent the infection. Therefore, 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," it added.

Broad-based and swift recovery of both demand and supply side components bears testimony to India’s far stronger macroeconomic fundamentals amid a once-in-a century crisis than during the global financial crisis in FY09 that had triggered the great global recession, the ministry added. 

“Inflation in FY09 was 9.1% whereas in 2020-21, it was 6.2% as government took timely and effective supply-side measures to address supply disruptions caused by lockdowns. Centre’s fiscal deficit in FY09 was two and a half times that of Emerging Market and Developing Economies in Asia whereas in FY21, careful targeting and calibration has ensured that India’s fiscal deficit is comparable to its peers. Current account deficit at 2.3% of GDP in FY09 made external debt sustainability vulnerable whereas in FY21, India had a current account surplus of 0.9% of GDP. With forex reserves more than twice the level in FY21 than in FY09, aided by a tenfold increase in FDI from $8.3 billion to $80.1 billion and large net FPI inflows unlike the outflows earlier, a much greater conviction about India’s high potential growth is evident among global investors," it said.

Subscribe to Mint Newsletters
* Enter a valid email
* Thank you for subscribing to our newsletter.

Never miss a story! Stay connected and informed with Mint. Download our App Now!!

Close
×
Edit Profile
My ReadsRedeem a Gift CardLogout