Tuesday, January 18, 2022

Indian Economy On Fast Lane To Recovery

By all accounts, the Indian economy is cruising on a firm V-shape path to the pre-Covid19 normalcy. Manufacturing is pacing ahead, with demand in the economy spurring normalization. Exports after six months expanded to demonstrate the world’s faith in India’s position in the global supply chain. Sales of two-wheelers, four-wheelers, and tractors have pleasantly surprised many, giving hints of inherent resilience of the Indian economy.

The Goods and Services Tax (GST) collection, seen as a credible indicator of the health of the economy, expanded last month after declining for six months, reflecting the cost of the economic disruptions. In September, the GST collections clocked a healthy four per cent rise. This indeed gives hopes that the steps taken to unlock India will be further reflected in normalization of the GST collections.

Mirroring an across the board economic recovery, exports for the first time expanded since February this year, registering a growth of 5.3 per cent. This truly affirms India’s key role in the global supply chain, besides easing of the global economic restrictions. Much thrust has been laid by the government to nudge Indian industrialists to scale up to meet the global expectation in the recent months.

Factories in India are estimated to have ramped up productions to meet demands. Scores of independent reports on the manufacturing index point to productions significantly improving last month. The Nikkei Manufacturing Purchasing Manager’s Index (PMI) for September reassured India’s pace of economic recovery, pegging the factory level activity at 56.8 against 52 in August. With the index above 50 representing growth, it becomes clear that the stimulus package unveiled by the government to hand-hold the economy is bearing fruits.

Giving further credence to definitive economic turnaround, the railway freight registered a 15 per cent growth in September. In India, rail freight is seen as an indicator of economic health, giving indications in advance of the economic activities. In addition, the railways is reporting healthy passenger traffic for its special trains to help the migrant workers return to their work places.

The farm sector had stayed least disrupted during the lockdowns, and the rural demand undeniably steadied the economy. Sales of tractors surprised even the manufacturers. But steps taken in recent years to boost incomes of farmers, which included over Rs one lakh crore of direct transfer to their bank accounts under the Pradhan Mantri Kisan Samman Nidhi scheme, could have played a key role in spurring rural demand. A good Monsoon is always an icing on the cake for the economy. The weather God, indeed, has been benign for India, as the country registered two continuous years of above normal Monsoon rains after a gap of 61 years.

Besides tractors, the automobile sector has been on the speedy path to recovery, as sales of two-wheelers and four-wheelers for last month surpassed the figures of the same period last year. The industry experts have pleasantly noted that the first time, buyers of the two-wheelers and four-wheelers are driving the growth in the automobile sector.

The pharmaceutical sector has been hailed the world over for their key role in mitigating the Covid-19 pandemic. This sector had been unaffected by the lockdown, and has been raising the capacity to meet the global demands. In the coming months, the vaccine manufacturing strength of India will further be on the display.

India had unveiled a slew of measures to hand-hold the micro and small enterprises, incentives for local manufacturing, and reforms touching the whole gamut of the economy, from farm to labour, as part of the Rs. 20 lakh crore stimulus package. The government has hinted of further support to the economy to boost the revival. Fears of a second wave of the Coronavirus is a concern, and the policy makers should stay a step ahead to insulate the economy from possible disruptions.

Script: Manish Anand, Senior Special Correspondent, The New Indian Express

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