India witnessing sharp V-shaped recovery, says finance ministry2 min read . Updated: 05 Sep 2020, 01:41 PM IST
- The V-shaped pattern of recovery is visible across key macroeconomic indicators such as auto sales, tractor sales, fertilizer sales, railway freight traffic, steel consumption and production, cement production, it said
NEW DELHI: India’s gross domestic product (GDP) contracted 23.9% year-on-year in the June quarter due to a stringent nationwide lockdown, but with easing of restrictions, the country is witnessing a ‘sharp V-shaped recovery’, the finance ministry said in its monthly economic review for August.
“India enforced the most stringent lockdown as reflected in the Government Response the pandemic induced death rate to one of the lowest in the world…As countries unlocked in the quarter starting in July, recovery is underway globally. India, too, is witnessing a sharp V-shaped recovery," the report said.
The finance ministry also said it's critical to re-orient India’s policy towards calibrated reconstruction of the economy, with specific attention on agrarian supply chains, factor markets, infrastructure, start-ups, financial inclusion, skilling and health care. “Progress in these areas will sustainably boost economic growth in years to come," the report said.
Even as the government is hopeful of a better performance in the subsequent quarters, most economists now expect the GDP to contract in all four quarters of the current fiscal and expect the economy to shrink anywhere between 5% and 11.5% in 2020-2021. Besides, there is a growing clamour for fresh fiscal stimulus by the government.
According to the government, the V-shaped pattern of recovery is visible across key macroeconomic indicators such as auto sales, tractor sales, fertilizer sales, railway freight traffic, steel consumption and production, cement production, power consumption, e-way bills, GST revenue collection, daily toll collections on highways, retail financial transactions, among others. The report also said that agricultural sector continues to remain a ‘bright and resilient spot’ aided by a healthy monsoon.
For the first time since the lockdown, India’s manufacturing purchasing managers’ index (PMI), at 52.2, moved into an expansionary zone in August.
There are also signs that consumption is gradually picking up, with passenger vehicle sales rising to their highest level at 1.83 lakh in July as compared to 1.43 lakh in March, along with some revival in rural demand, led by growing sales of small cars, two-wheelers and sports utility vehicles, and increase in registrations for commercial and agricultural tractors.
The report further said the world, post covid-19, will be a different onewith structural changes in production, consumption and work patterns.
“To pivot and strengthen India’s position in emerging global value chains amid changing trade dynamics, re-aligning policy incentives in favour of labour intensive export sectors is a pressing need," it said, adding that India needs to anchor its strengths in the area of generic drugs and pharmaceuticals exports and regain its market share in active pharmaceutical ingredients (APIs).