India's economic recovery on track as COVID crisis slowly ebbs

AKIPRESS.COM - India's finance ministry said GDP data reflects a V-shaped recovery but also warned that India is not yet past the pandemic, Aljazeera reported. India's economy returned to growth in the three months to December 2020 and the recovery is expected to gather pace as consumers and investors shake off the effects of the coronavirus pandemic, economists said.
Fiscal and monetary policy could boost India's recovery prospects, they said, amid signs of a pick-up in consumer demand and government spending.
Prime Minister Narendra Modi has launched plans for a massive vaccination drive, while outlining a slew of tax incentives to boost the manufacturing sector.
Gross domestic product (GDP) grew 0.4 percent in October-December 2020. That compared with revised contractions of 7.3 percent in July-September and 24.4 percent in April-June.
Investment recorded its first growth since December 2019, growing at 2.6 percent compared to a revised 6.8 percent fall in the previous quarter. Consumer spending - the main driver of the economy - is also improving. Dropped 2.4 percent in October-December compared to an 11.3 percent fall in the previous quarter.
The economy has returned to the "pre-pandemic times of positive growth rates", a finance ministry statement said after the release of the GDP data, which it said reflected a continued V-shaped recovery.
"Significant recovery in manufacturing and construction augurs well for the support these sectors are expected to provide to growth in 2021-22," said the statement, which also cautioned that India is not yet beyond "the danger of the pandemic". Economists have raised their forecasts for the current fiscal year and 2021-22, expecting a pick-up in government spending, consumer demand and a resumption of most economic activities curtailed by the COVID-19 pandemic.
Annual growth of 3.9 percent in the farm sector and 1.6 percent in manufacturing during the three months to December raised hopes of an early recovery.
The Reserve Bank of India (RBI), has projected growth of 10.5 percent in the fiscal year 2021-22, that starts in April.
Some analysts warn, however, that a recent rise in crude oil prices and a surge of COVID-19 cases in parts of the country may pose risks to the nascent recovery. The pace of recovery in the informal sector and contact-intensive services could be impacted by the resurgence of domestic virus cases in parts of the country.
India also revised annual GDP estimates for the fiscal year, predicting an 8 percent contraction, deeper than an earlier estimate of -7.7 percent. Sectors such as retail, airlines, hotels and hospitality are still reeling from the impact of the pandemic.
The central bank said the growth outlook had improved and inflation was expected to remain within the RBI's targeted range over the next few quarters.