The Indian economy has been proven on many occasions to be extremely resilient to the vagaries of weather, war, myriad international factors, and now, even the global Covid-19 pandemic. In spite of massive initial disruptions as the pandemic started, India’s economy is back on its track.
The signs are so strong that it is now indicating a strong V-shaped recovery of the Indian economy. There are a lot of high-frequency data which are extremely positive.
Growth is Back, Recovery is Underway
International Monetary Fund predicts India to bounce back and its GDP to grow at 8.8% in 2021 versus 6% growth expected earlier. In its latest ‘World Economic Outlook’ report, IMF predicts India to regain its position as the fastest-growing emerging economy in FY22. While presenting RBI’s monetary policy on October 9th, RBI Governor Shaktikanta Das said he could see the silver lining in flattening of the curve of active Covid-19 cases in India. In fact, new Coronavirus infections are on a downward trajectory while the numbers of recovered patients are improving. He added that ‘contraction in growth is behind us’. RBI predicts GDP growth to break out of contraction and turn positive in Q4. Das said the modest recovery in high-frequency indicators could strengthen in H2 FY21.
Signs of Revival are Definitely Strong
There are definite signs of revival as well. Some economic indicators have returned to the pre-Covid level or just within kissing distance.
Indian Railways registered a 10% increase in freight loading in September 2020 compared to the corresponding period last year. Freight operations include industrial raw materials, coal, fertilizer, etc. and this indicated robust economic recovery.
The agriculture sector has performed very well as noticed by high agrochemicals and other raw material demand. In the April-June period, the agriculture sector grew by 3.4% despite the overall contraction of GDP. Rural India has shown resilience in this time of crisis on the back of healthy Kharif output. The sale of tractors saw a growth of 25% and surpassed September 2019 levels.
Other sectors that are performing very well are healthcare and information technology. Even the cement sector is witnessing increased demand as real estate construction activities are strong in tier 2 and tier 3 cities.
The government’s collection of GST jumped 4% year-on-year to in Rs. 95,480 crore in September, which is also the highest since the beginning of the lockdown – signalling the return of demand. E-way bills used for transporting goods nationwide also saw a record rise in September. The IHS Markit India Manufacturing Purchasing Managers’ Index (PMI) rose to 56.8 in September – which is the highest level in over eight years. Toll collection also surpassed pre-Covid levels in September. UPI payments also saw a hike of 12% on a month-on-month basis in September.
EPFO reported 20 lakh enrolments in the first 5 months of 2020-21 in spite of the initial decrease during the lockdown.
Consumer Demand is Back, Festival Season Business is Robust
Almost all consumer-facing businesses are witnessing strong demand. Amazon, festive Flipkart combined sales hit 26,000 crore in just four days.
Festive demand has put sales of other passenger vehicles also in the fast lane. Demand is coming back strongly across key markets in Passenger Vehicles and 2-wheeler segments. Maruti has reported a 31% rise in sales on year on year basis in September 2020.
The real estate sector is also seeing increased demand, especially for the affordable segment. Lowest home loan rate in a decade in enthusing home-buyers to avoid postponing their home-buying decision any further.
Most FMCG companies are reporting higher sales compared to the pre-Covid period. HUL reported revenue from sales of products at Rs 11,510 crore, up 15.19% from Rs 10,223 crore a year ago.
The Outlook is Bright, Government is Making Major Reforms
The outlook for the Indian economy is quite bright and we will be an island of growth in otherwise sluggish economies in most of the world.
The central government is also helping by implementing major reforms. Increased expenditure on infrastructure, defence, and agriculture will further consolidate the economy on the growth path. The government is considering a slew of measures to further boost the economy.
The despair that engulfed the Indian economy during the lockdown period is now a thing of the past. The inherent resilience of the economy will ensure that India is again on the growth path, and the worst is behind us.