Business

‘India to reach pre-Covid levels by March, 2021’

New Delhi, Nov 4 (IANS) | Publish Date: 11/4/2020 1:01:15 PM IST

With economic activities gaining momentum, India is poised to recover fast and may reach the pre-Covid levels of economic parameters by the current financial year’s (FY21) end, according to a report by the Department of Economic Affairs.

The Monthly Economic Review for October, however, noted that the recovery may get impacted if the second wave of novel coronavirus infection gets triggered.

“India stands poised to recover at a fast pace and reach pre-Covid levels by the end of the year - barring the incidence of a second wave that may be triggered by the fatigue with social distancing. The continuous improvement in forward looking RBI indices of consumption and business sentiment for the next year augurs hope of a strong economic rebound,” it said.

It noted that that the growth prospect for the Indian economy is also corroborated by the International Monetary Fund’s (IMF) October 2020 projection of 8.8 per cent real GDP growth of India in FY 2021-22, highest among its global counterparts.

The report noted that a steady contraction of active Covid-19 cases and a low case fatality rate has instilled measured optimism in India that the worst is behind now.

At the same time, a second wave of the pandemic in advanced nations is a grim reminder of how reality hits back when caution is compromised, it added.

Movement of high frequency indicators in October clearly point towards broad based resurgence of economic activity, notably in healthy kharif output, power consumption, rail freight, auto sales, vehicle registrations, highway toll collections, e-way bills, rebound in GST collections and record digital transactions.

Rural consumption has stayed strong, in part helped by sustained MSP procurement of food grains by government at higher prices. Manufacturing Purchasing Managers’ Index rose from 56.8 in September to 58.9 in October, pointing to the strongest improvement in the health of the sector in over a decade.

PMI Services index also rose to 54.1 in October, ending the seven-month sequence of contraction, signalling improved market conditions. With the onset of the festive season, overall consumption is expected to see further uptick in the coming months enhancing prospects of faster economic normalisation.

Meanwhile, Ease in Covid-19 restrictions, along with fresh demand, lifted India’s service sector output October.

The seasonally adjusted India Services Business Activity Index showed an increase that ended a seven month sequence of reduction.

The index rose to 54.1 in October, up from 49.8 in September.

Besides, the seasonally adjusted business activity index posted above the 50 (index reading) no-change mark the first time since February.

An index reading above 50 indicates an overall increase compared to the previous month, and below points to an overall decrease.

“The latest reading pointed to a solid rate of growth in output that was stronger than its long-run average,” the IHS Markit report said.

As per the report, panel members said the upturn was supported by improved market conditions amid the loosening of Covid-19 restrictions.

Furthermore, the survey report said that October recorded the strongest increase in private sector output in close to nine years.

“A sharp rise in factory production was accompanied by a return to growth of services activity,” the report said.

The Composite PMI Output Index rose from 54.6 in September to 58 in October.

“Aggregate new orders expanded for the second straight month in October, with the rate of growth accelerating to the highest since January 2013.

“New business at manufacturing firms increased at a quicker pace than at their services counterparts.”

However, companies in both the manufacturing and the service sectors recorded lower payroll numbers at the start of the third quarter of fiscal year 2020-21.

As a result, the report pointed out that private sector employment declined for the eighth straight month.

According to Pollyanna De Lima, Economics Associate Director at IHS Markit: “It’s encouraging to see the Indian service sector joining its manufacturing counterpart and posting a recovery in economic conditions from the steep deteriorations caused by the Covid-19 pandemic earlier in the year.”

“While a revival of the manufacturing industry began in August, only now the service sector started to heal. Service providers signalled solid expansions in new work and business activity during October. They were also more upbeat about the outlook, though hopes of output growth in the year ahead were pinned on a Covid-19 vaccine.”

 

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