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Home / News / India /  Indicators point to revival gaining pace in Sep: FinMin

Implementation of Aatmanirbhar Bharat package and unlocking of the economy have ensured that recovery in India has gained momentum even as the sustained spread of the virus poses a downside risk to short-term and medium-term growth rate of Asia’s third-largest economy, 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. Most economists now expect the economy to contract in double digits this fiscal.

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 (GST) collections also grew 3.9% in September for the first time this fiscal. Also, the manufacturing purchasing managers’ index (PMI) rose to 56.8, the highest 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. A recovery in rail freight helped revenues to grow for the first time since March in August and early September. Easing of inter-state movement restrictions, quarantine policy and unlocking were also accompanied with recovery in rail passenger earnings.

Quoting data for the 14-day period through 30 September, 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 115,000 to 124,000. The pandemic, however, is far from over. Yet, the declining positivity rate at the all-India level sets the stage to further push the frontiers of 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 covid-19, the ministry said the government has strategically undertaken 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. 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 stabilize and begin to recover from 2021 onwards. India’s probable growth path is visible in this assessment," it added.

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