The finance ministry on Thursday, December 3, said the Indian economy is expected to clock a better performance in the third quarter.
The ministry in its latest monthly economic report stated that there were no structural or fundamental factors responsible for the contraction in the GDP (gross domestic product) by 23.9% between April and June.
It further noted that the GDP contraction easing to 7.5% in the September quarter from -23.9% in the previous quarter "underlines a quarter-on-quarter surge in GDP growth of 23 per cent."
Finance Ministry's Department of Economic Affairs (DEA), which released the monthly economic review for November, said that "this V-shaped recovery, evident at the half-way stage of FY21, reflects the resilience and robustness of the Indian economy."
"The sustained increase in major economic activity indicators beyond September raises hopes of a better performance in Q3 in alignment with the global scenario," the ministry said in the report released on Thursday.
Recognising the downside risk of a second wave of coronavirus infections, it highlighted that "there is a growing cautious optimism that the steep plunges of April-June quarter of 2020 may not resurface with significant progress in vaccines and contact intensive sectors increasingly adapting to a virtual normal."
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 report pointed out.
The growth drivers have obtained the largest support from agriculture followed by construction and manufacturing, it said, adding that 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, the report stated.
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.In general, it noted, 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.
Sharing the outlook for 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.
The 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).
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 until a vaccine is approved and a large section is inoculated, the report underlined.
(With inputs from PTI.)