Economic Recovery is Gaining Steam. Further Thrust Should be Envisaged!

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  • There is no denying that the gradual lifting of the pandemic restrictions is paving way for several economic activities to pick up the pace at last. As people and businesses finally heave a huge sigh of relief vis-à-vis Covid virus infection rates gradually receding, the positivity prevailing across the country is palpable. The giant steps taken on the vaccination drive have hugely contributed to clearing the clouds of uncertainty, apprehension, and a general feeling of déjà vu amongst the citizens. A sense of intent, confidence, and optimistic anticipation for better tidings in the coming days is in the air. To buttress the claim, recently made available high-frequency economic data also suggests the Indian economy has crossed an important milestone.

PC: Fredrik Lundberg

  • Glad to note that the Indian economy managed to weather the intense second Covid wave better than expected largely owing to the Union and State Governments making every effort to avoid implementing harsh lockdowns. We all know how suffocating and stringent the successive lockdowns were during the first Covid wave. The appropriate benchmark to arrive at the economic churning, however, is pre-pandemic performance and not year-on-year comparisons. By that measure, India is likely to exceed the pre-pandemic output by the end of the financial year. The Reserve Bank of India’s October Bulletin indicated as much that its economic activity index forecasts a GDP growth of 9.6% in the July-September quarter.
  • Further, it is revealed that the total employment estimate in September was 406.2 million, almost at the level of the pre-Covid estimate of 408.9 million in 2019-20. Most notably, salaried jobs rose sharply in September to touch 84.1 million, once again almost at the pre-Covid level of 86.7 million. Moreover, advance tax collection in April-September 2021 was Rs. 2.53 lakh crore, 14.6% higher than the pre-Covid collection in 2019-20. The downside however is that growth impulses still seem to be fragile. Such a phenomenon is noticed at the lowest level of the employment pyramid which does not augur well for the overall improvement of the economy. Demand for the MGNREGA in April-September 2021 period was higher than the pre-Covid 2019.

PC: Shane Ratigan

  • Also, data on the FMCG demand showed that it shrunk by 0.5% in volume terms in the July-September 2021 quarter, influenced partly by weakness in unbranded segments. Thus, ensuring adequate purchasing power in a vast section of the workforce should be envisaged. Interestingly, personal loans now make up about 27% of the total credit made available, propelled mainly by home loans, overtaking industrial credit in the bargain. This worrying credit pattern raises a question on the state of MSMEs as 60 million units contribute about 45% of manufacturing output. Of course, big industries are not starved of funds as the data indicate. Thus, more targeted support to ensure MSMEs, forming the fulcrum of our goal to reach a $5 trillion economy, are not starved of funds will ensure the current growth momentum does not run out of steam.