Despite Pandemic Risks, Indian Economy Likely Staged A Strong Recovery In April-June Quarter

Despite a devastating second wave of Covid-19 pandemic in the country, it is likely that the India’s economy rebounded in the April-June quarter form the huge dip it experienced last year. The driver for the rebound is expected to be the improved manufacturing output.

With an annual contraction of 7.3 per cent in the fiscal year 2020-21, the hit to the third largest economy of Asia last year was one of the largest biggest for any major economy

The second wave of the pandemic, which was much worse than the first wave in 2020, that hit the country in April-May this year was less impactful for the economy because of less stringent lockdowns by state governments.

But the country’s economy still faces the risk of derailment, according to many analysts, because of a spike in Copvid-19 infections caused by the Delta variant of the coronavirus and the slow pace of vaccinations in some states. Analysts are of the opinion that the Indian economy is not likely to reach its pre-pandemic levels of about $2.9 trillion before the middle of the next fiscal year which will start form April 2022.

There was likely a 20.2 per cent growth in India’s gross domestic product for the June quarter compared to the same quarter a year ago, predicted a survey of 41 economists conducted by the news agency Reuters. There was a record 24,4 per cent contraction in the same quarter last year.

The Indian economy will mark its fastest growth pace since the mid-1990s, from when official quarterly data is available, even if the economy achieved the median poll forecast for growth in e June quarter. That would also mark a 1.6 per cent growth compared to the previous March quarter – the last for the fiscal year 2020-21.

The central bank of the country – the Reserve Bank of India (RBI) which has held on to its loose monetary policy, has forecast an annual growth of 9.5 per cent for the  current fiscal year with the warning of the economy being hit by a possible third wave of the pandemic towards the third quarter of the fiscal year.

According to estimates, sectors such as retail, auto sales, farm output, construction and exports saw an uptick during the June quarter which supports the claims of the Indian government of a recovery in the economy. However, it is predicted some sectors such as transport, tourism and consumer spending was still weak.

“Nearly one million of about 4 million trucks plying long-distance cargo are still off the road, hit by a closure of many businesses and a recent surge in virus cases in the state of Kerala and neighbouring Tamil Nadu,” said Anjani Mandal, CEO of Bengaluru-based Fortigo Logistics.

Many of the manufacturers around the world are facing supply chain disruptions because of a surge I Covid-19 cases caused by the highly contagious Delta variant f the coronavirus. This is also true for Indian manufacturers, potentially weighing in on factory output and could compound issues for a fragile recovery of the Indian economy he said.

“The government’s measures, if successful, could put the economy on a high growth path of 7.5-8% in coming years,” said N.R. Bhanumurthy, vice-chancellor, Bengaluru Ambedkar School of Economics University, while forewarning of short-term risks this year.

(Adapted from TheEconomicTimes.com)

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