The Finance Ministry on Saturday said that the strong economic recovery in the second quarter of financial year of 2021-22 suggests kick-starting of investment cycle, and is expected to gain more strength in the remaining quarters of FY22.
The Indian economy grew by 8.4 per cent in July-September quarter of the ongoing financial year. It recovered more than 100 per cent of the pre-pandemic output in the corresponding quarter of FY 2019-20, the Department of Economic Affairs (DEA) said in its monthly economic review report for the month of November.
It said India is among the few countries to have recorded four consecutive quarters of growth amid COVID-19 (Q3, Q4 of FY21 and Q1,Q2 of FY22), reflecting the resilience of the Indian economy. The recovery was driven by a revival in services, full-recovery in manufacturing and sustained growth in agriculture sectors.
"The recovery suggests kick-starting of the investment cycle, supported by surging vaccination coverage and efficient economic management activating the macro and micro drivers of growth," the report said.
The recovery is expected to gain further strength in the remaining quarters of FY22 as 19 of the 22 high frequency indicators in September, October and November crossed their pre-pandemic levels in the corresponding months of 2019, the DEA said.
While COVID-19 variant Omicron may pose a fresh risk to the ongoing global recovery, the report said preliminary evidence suggests that it is expected to be less severe, more so with the increasing pace of vaccination in India.
The agriculture sector continues to remain in the green with healthy progress of rabi sowing, followed by a resilient year-on-year (YoY) growth of 4.5 per cent in Q1 and Q2 of FY22, it said.
"As on 3rd December 2021, overall rabi acreage stood at 438.5 lakh hectares, 6.1 per cent higher as compared to the previous year. Area under rabi oilseeds has increased by 29.2 percent compared to last year, boding well for domestic edible oil production," it said, adding that rising rural demand can be deduced from robust domestic tractor sales in October which rose 25 per cent over previous month, 0.4 per cent over October 2020, and 8 per cent over October 2019 level.
On industrial growth, it said that the output for eight-core industries grew at 7.5 per cent in October vis-à-vis October 2020, while Index of Industrial Production (IIP) also continued to recover in October 2021 to reach 108 per cent of pre-pandemic October 2019 levels, with 107 per cent recovery in manufacturing, indicating a strong growth.
In sync with the economic recovery, the GST collection for November also rose to their second-highest level of Rs 1.31 lakh crore.
Citing a report by brokerage firm Jefferies, the report said that the housing cycle uptick augurs well for corporate investment to pick up pace and complement the capex push on infrastructure by the government.
On inflation, the ministry said that CPI inflation, which was at 4.5 per cent in October, continued to remain well ensconced within the policy target band for four months in a row, reflecting careful macroeconomic management. Besides, the cut in taxes on petrol and diesel by the Centre and state governments augurs well for checking inflation through second-round effects of easing input costs, it said.
India's merchandise exports remained strong in November 2021 with 26.5 per cent growth on a YoY basis. The sustained and strong increase in exports augurs well for boosting growth and employment, the report said.
It concluded by saying that the Indian economy is expected to grow on the back of a series of second generation and more nuanced structural reforms in the pandemic years of 2020 and 2021. "India is expected to support an annual growth rate of 7 per cent plus until the end of this decade. India will be among the few economies to rebound so strongly from the contraction last year due to COVID-19," it added.
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