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After a long time, the Indian economy had a run of good news. As they say, when it rains, it pours; mercifully this time, it was all good news. For the month of September, the IHS-Markit Purchasing Managers’ Index for India’s manufacturing sector rose to its highest in more than eight years; annual export growth turned positive; the goods and services tax (GST) collections registered an increase and E-way bills, or electronic permits for transportation of goods, the barometer for internal trade, witnessed a record growth; the month also saw a rare 15% jump in railway freight traffic from a year ago.

The September surprise, pleasant though, begs the obvious question: Does one swallow make a summer or is this indeed an inflection point for the Indian economy? In short, is the worst behind us? Or is this simply a bump, because of the low base?

Indeed a very difficult question to answer. It also depends on who you speak to. Doomsayers would immediately dismiss such talk, just as optimists will press their case for a recovery. The truth, as always, lies somewhere in between. But one thing both sides will concur is that it has dented the mood of despondency about the economy’s future. Yes, our policy planners have been saying ‘we shall overcome’; but few, given the inclement circumstances, were willing to buy-in. Especially after the bruising first quarter showed the country’s economy contracting by a staggering 24%.

Addressing a session hosted by Dun & Bradstreet India, expenditure secretary T. V. Somanathan in end-August actually suggested a rebound was on the anvil and that the economy may actually end the fiscal year without any contraction. Stacked against the claims of pundits who projected a contraction of upwards of 10%, this claim was a clear outlier. Not after last week.

What is working for the Indian economy at the moment is agriculture. Blessed with excess rains in this monsoon, it has stood out like a lighthouse. Advance estimates released a fortnight ago by the government project production of kharif foodgrains to grow to a record 144.5 million tonnes. The structural reforms—in agriculture, healthcare, bureaucracy, public distribution system—undertaken over the last few months is improving the plumbing in the system as it were. Unclogging the sloth from the economic pipes will bear out when the recovery kicks in.

The biggest threat to the Indian economy is posed by the pandemic covid-19 which originated in Wuhan, China. Yes, the growth in active cases is slowing, but not yet flattening. This has triggered the phenomenon of the fear economy.

Hapless local administrations at the state level have responded with their most potent tool: lockdowns. However, in the absence of contact tracing and universal practice of social distancing, it only delayed the inevitable. Worse, the downside has been the impact on livelihoods. Mobility data tracked by Google shows how the gradual rebound suffered a setback after the spate of local lockdowns.

The promise of the vaccine is far-fetched. For one, it is unlikely to be ready till next year. Second, there will not be sufficient doses to cover the entire population; this will force authorities to stagger the vaccination with obvious priority given to frontline health workers. In other words, everyone has to learn to live with this once-in-a-century virus. And this can only be achieved if we all follow the basic rules of social distancing and wearing a mask. This is the only way the fear economy can be overcome. In turn, reviving animal spirits will make a legitimate case for another economic stimulus—which the finance minister made clear, in an interview to Mint as far back as in May, is very much on the table—to generate the desired momentum.

We can do one other thing: Stop catastrophizing.

Anil Padmanabhan is managing editor of Mint.

Comments are welcome at anil.p@livemint.com

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