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NEW DELI: The implementation of Aatmanirbhar Bharat package and unlocking of the economy have ensured that India's economic recovery gained momentum, even as the sustained spread of the virus poses a downside risk to short-term and medium-term growth rate, the finance ministry said on Sunday.

“With India unlocking by the day, consequent demand resurgence is palpable in many sectors. Economic indicators allude to a steady recovery in almost all sectors, with some sectors shooting above their previous-year levels as well. This is despite headwinds of increasing covid cases in non-metro cities and rural areas and rising food prices. Positive results from the implementation of AatmaNirbhar Bharat package and unlocking of the economy are evident in India’s high-frequency real sector indicators of September," the finance ministry said in its latest Monthly Economic Review.

India’s economy contracted at a record 23.9% in the June quarter of FY21, underlining the extent of economic damage inflicted by the pandemic. Most economists now expect Indian economy to contract in double digits in FY21.

During September, India’s merchandise exports entered the positive territory for the first time in seven months, growing at 5.3%. Goods and Services Tax collections also grew 3.9% in September for the first time in the current fiscal year. India’s manufacturing purchasing managers’ index (PMI), rose to 56.8, the highest mark since January 2012, supported by accelerated increases in new orders and production, renewed expansions in export sales as well as an improvement in business confidence. The recovery in rail freight enabled revenue earnings clocking positive growth for the first time since March in the months of August and early September. Easing of inter-state movement restrictions, quarantine policy and unlocking were accompanied with recovery in Rail Passenger Earnings as well.

Quoting data for the 14-day period from September 17 to 30, the finance ministry said India may have crossed the peak of covid-19 case-load. “During this period, the seven-day moving average of daily positive cases has steadily declined from about 93,000 to 83,000 while the seven-day moving average of daily tests have risen from about 1,15,000 to 1,24,000. The pandemic however is far from over. Yet, the declining positivity rate at the all India level sets the stage to further push up the frontiers of economic recovery," it added.

The finance ministry said as intermittent lockdowns cease, containment zones become fewer and smooth operation of supply chains resumes, a fall in retail inflation may boost personal consumption expenditure. “The availability of domestic liquidity matches that in the external sector although at this stage it is resulting in higher growth of demand deposits. This highlights the issue of rising precautionary savings which are, in turn, limiting growth in personal consumption and acceleration in activity levels," it said.

To combat the downside risks of spread of coronavirus pandemic, the finance ministry said that the government has strategically undertaken various important structural reforms encompassing various sectors. “These will strengthen the fundamentals of the economy towards a strong and sustainable long-term growth. The enabling policy environment and initiatives taken by all stakeholders to seize the available opportunities will actualise the growth potential of the Indian economy," the monthly review said.

In line with this, S&P Global Ratings has retained India’s investment grade (BBB-) credit rating with stable outlook as it expects the country’s economy and fiscal position to stabilise and begin to recover from 2021 onwards. India’s probable growth path is visible in this assessment, it added.

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