The worst for the Indian economy seems to be over, with several economic indicators pointing towards a resurgence in economic activity, even as risks on account of rising COVID-19 cases and intermittent state lockdowns remain, the Finance Ministry said in its latest economic review on Tuesday.
With India unlocking, the worst seems to be over as high-frequency indicators show an improvement from the unprecedented trough the economy had hit in April 2020, the Department of Economic Affairs said in its monthly economic report for July. “These include Index of Industrial Production (IIP), Purchasing Managers Index (PMI), power generation, production of steel and cement, railway freight, traffic at major ports, air cargo and passenger traffic, e-way bill generation capturing inter-state movement of goods, consumption of petroleum products and motor vehicle registration among others.”
The report, however, noted that the rise in COVID-19 cases and subsequent intermittent lockdowns make the recovery prospects fragile and called for constant and dynamic monitoring. A senior government official said state-specific lockdowns were hitting the supply chain and the value chain, bringing an element of unpredictability in economic revival. Pinning hopes on the farm sector, the report said, agriculture is set to cushion the shock of the COVID pandemic on the Indian economy in 2020-21. “With the forecast of a normal monsoon at 102 per cent of long-period average (LPA), agriculture, which contributes about 15 per cent of total gross value added, is set to cushion the shock of COVID pandemic on the Indian economy in 2020-21,” it said.
Timely and proactive exemptions from COVID-induced lockdowns to the sector facilitated uninterrupted harvesting of rabi crops and enhanced sowing of kharif crops, it said, adding a record procurement of wheat has enabled a flow of about Rs 75,000 crore to the farmers which will boost private consumption in rural areas.
“Since September 2019, the terms of trade has moved in favour of agriculture and has reinforced rural demand. This has manifested in an increase in rural core inflation between March and June 2020. As a result, the push for growth in coming months appears to be pitched in rural India,” it said.
Contraction in industrial activity, measured by IIP and eight core industries, has eased in May as compared to April, while signs of further recovery were witnessed in June with India’s Manufacturing PMI improving from 30.8 in May 2020 to 47.2 in June 2020. Contraction in output and new orders were at much lower in June, compared to April and May.
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