Sorry, you need to enable JavaScript to visit this website.
India's revival

The recently released GDP figures on the 27th of November for the 2nd quarter at -7.5% seem better than expected given the overall forecasts of various agencies about India for quite some time now. This sharper recovery than what was being expected has brought a sense of cheer and optimism among businesses in the country. India at 7.5% contraction seemed much better off than the other 49 countries that declared their GDP numbers for the quarter averaging -12.4%. To put it down in simpler terms, bouncing back from the -23.9% GDP contraction in the first quarter which accounted for a staggering loss of INR 11.1 lakh crore loss in terms of the nominal GDP to the second quarter at a 7.5% contraction and narrowing the gap to INR 1.98 lakh crore is remarkable in itself. 

The reason behind the surprisingly fast recovery of India is driven by many factors. First, we see a manufacturing-led recovery coming our way as the sector has recovered 91% from its losses incurred in the first quarter. The service sector has also witnessed significant recovery cutting down its losses by 43% driven by renewed activity in travel, transport, hospitality. Apart from these parameters, we also have been witnessing a steady growth in the agricultural GDP, which is an indication of a sustained rural demand.  The signs of a faster recovery have a lot to do with the way how the government and the RBI has shouldered a great responsibility in responding to the needs of market and citizens through prudent fiscal and monetary measures.

Be it announcing the calibrated stimulus packages in a phase wise manner by the government to support agriculture, MSMEs and the informal sector dependent class or RBI’s steps like infusing liquidity through repo operations, open market special operations, targeted long term refinance operations, increasing re-finance limits for housing finance companies, back stop facility for mutual funds among many others have re-affirmed a recovery path for the nation. 

Most of the indicators like collections from e-tolls, e-way bills, fuel consumption, electricity consumption, auto sales, tractor sales, return of migrant workers are at pre-Covid levels indicating India is on a fast path of economic recovery. For some may argue the signs of recovery are because of the pent-up demand due to the lockdown months. Of course that could be one of the reasons but it being the sole reason for signs of recovery is an overly pessimistic outlook. For example, with the interest rate in the country at a 15 year low, fiscal incentives of the government on home loans, tax benefits, one would argue that this is one of the best time to purchase a home. Steps such as this by the government across sectors re-affirms that the bounce-back is not merely due to a pent-up demand but the reforms of the government have been an instrumental force that is paving way for an inherent demand in the country.

This blog has been authored by Dr. Rouhin Deb. 
 

We are India's national investment facilitation agency.

image

For further queries on this subject, please get in touch with us @Invest India.
Raise your query