The nation is well on the path of recovery from a trough April 2020, as agriculture sector may provide a cushion for the worst-hit economy this year as there is a possibility of a good monsoon this year and the sector also facilitated uninterrupted growth of rabi crops and enhanced sowing of Kharif crops say’s Finance Minister in a report on Tuesday.
With nationwide unlocking, the worst seems to be over for the economy as high-frequency indicators recovered in unprecedented troughs in April; supported by government and Central bank policies, however, risk on account of rising Covid cases and intermittent state lockdowns remains same showed Macroeconomic report for July.
What does the Report say?
The report raised the hopes on the farming sector as it showed that agriculture is set to cushion the shock of the Covid-19 pandemic on the Indian economy in the financial year 2020-2021. The report also highlighted that “With the forecast of a normal monsoon at 102% of the long-period average (LPA), agriculture, which contributes about 15% of total gross value added, is set to protect the Indian economy from the shock of COVID pandemic in 2020-21.”
Timely and necessary exceptions from lockdown contributed to uninterrupted growth of rabi crops and increased sowing of Kharif crops, whereas a record procurement of wheat has enabled a flow of approximately about INR 75,000 crore to the farmers which will boost private consumption in rural areas. The reports also showed that “Since September 2019 the terms of trade have moved in favour of agriculture and have increased rural demand which resulted in an increase in rural inflation in March and June 2020. This may push the growth in the coming months in rural India.
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Recent agricultural reforms helped in the deregulation and liberalization of the agriculture sector. It further empowered the farmers to become a bigger and more stable participant in the journey of India’s growth and development.
Discussing some parameters showing improvement the report show’s contraction in industrial activity, measured by Index of Industrial Production (IIP) and eight-core industries, has eased in May as compared to April. Industrial output expanded across all sectors and sub-sectors within IIP in May as against April. Further recovery was observed in June with India’s Manufacturing PMI improving from 30.8 in May 2020 to 47.2 in June 2.020 with output and new orders contracting at much lower rates than seen in April and May, it said.
The report added that services PMI recovered from 12.6 in May 2020 to 33.7 in June 2020, owing to some stabilization in output levels with around 59% of firms reporting no change in output, 4% reporting growth and 37% reporting reduction since May.
There was an upbringing in infra and construction activities during the unlock phase whereas there was a contraction in the production of finished domestic steel from 41% in May to 31.1% in June 2020.