The Indian economy is witnessing a V-shaped recovery as the Gross Domestic Product (GDP) has recorded a quarter-on-quarter growth of 23% in the July-September quarter of this fiscal, according to the Finance Ministry's latest Monthly Economic Review. The decline in the GDP narrowed to 7.5% in the second quarter of this financial year, over 23.9% in April-June quarter. "The year-on-year GDP contraction of 7.5% in Q2 of 2020-21 underlies a quarter-on-quarter surge in GDP growth of 23%."
"This V-shaped recovery, evident at the half-way stage of 2020-21, reflects the resilience and robustness of the Indian economy. The fundamentals of the economy remain strong as gradual scaling back of lockdowns, along with the astute support of Atmanirbhar Bharat Mission has placed the economy firmly on the path of recovery," the Monthly Economic Review for November said.
The growth drivers have obtained the largest support from agriculture followed by construction and manufacturing, it said, adding, the contact-sensitive services sector has also contributed although mainly through logistics and communication. The recently celebrated festive season contributed to a rise in fresh COVID-19 positive cases in India, although numbers have started to decline again, a trend seen in many other countries, it said.
Consequently, it said, world-wide, the months of October and November, 2020 have been of economic uncertainty with global composite PMI and goods trade activity showing a tepid increase while energy and metal prices around the world have moved in different directions further adding to the uncertainty.
In general, it said, inflation has softened in advanced economies while climbing up further in emerging market economies reflecting a relatively larger impact of supply-side disruptions on economically more challenged countries in the world. "High optimism among investors however continues unabated as seen in equity markets the world over. With further weakening of the US dollar in November, prospects of growth in the rest of the world have become stronger," it said.
Sharing the outlook about the third quarter, the report said there is cautious optimism that global economic uncertainty does not mirror itself in India notwithstanding moderation of a few high frequency indicators late in the month of November. Overall increase in Rabi coverage with adequately filled irrigation reservoirs bodes well for the growth of agricultural output in 2020-21, it said.
Further, sustained demand for labour arising from increase in Rabi sowing has also contributed to growth in rural wages additionally propped up by increase in wages and employment generation under Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS).
The additional allocation of ?10,000 crore in the latest package for Pradhan Mantri Garib Kalyan Rozgar Yojana would give a further boost to job creation in the rural sector and supplement rural incomes.
Increase in minimum support prices for both Kharif and Rabi crops in 2020-21, and progress in rice procurement, have already been supplementing rural incomes in the country, it said. Talking about the downside risk, the report said, the spread of a second wave of COVID-19 is a challenge.
However, there is cautious optimism that the steep plunges of the April-June quarter of 2020 may not resurface with significant progress in vaccines and contact intensive sectors increasingly adapting to a virtual normal. The need of the hour is to follow COVID-appropriate behaviour and earnest observation of the laid down standard operating guidelines till a vaccine is approved and a large section is inoculated, it said.