Despite a disastrous second wave of COVID-19 cases, India’s economy likely recovered in the April-June quarter from a severe drop last year, aided by better manufacturing.
After a countrywide lockdown early last year, Asia’s third-largest economy took one of the worst knocks among major nations, shrinking 7.3 percent in 2020/21. However, because of less strict lockdowns imposed by state governments, the economy was not as seriously hit by the second wave in April-May of this year. Many analysts believe that the risk of spiking infections from the Delta variant, as well as the slow pace of vaccinations in some states, will have a negative impact on India’s growth momentum, with the economy unlikely to reach its pre-pandemic level of about $2.9 trillion before the middle of next fiscal year, which begins in April.
According to a Reuters poll of 41 analysts, the gross domestic product would grow 20.0 percent year on year in the June quarter, compared to a record decline of 24.4 percent in the same period last year.
If the median poll estimate comes true, it will be the strongest growth since the mid-1990s, when official quarterly data was available, and it will be a significant increase over the previous quarter’s 1.6 percent. The Reserve Bank of India (RBI), which has maintained its monetary policy liberal, has predicted annual growth of 9.5 percent for the current fiscal year, while it has cautioned about the risk of a third pandemic wave.
Many sectors, including retail, car sales, farm production, construction, and exports, have improved since June, supporting the government’s claim of a quick recovery, while others, like transportation, tourism, and consumer spending, have remained poor.
“Nearly one million of about 4 million trucks plying long-distance cargo are still off the road, hit by a closure of many businesses and a recent surge in virus cases in the state of Kerala and neighboring Tamil Nadu,” said Anjani Mandal, CEO of Bengaluru-based Fortigo Logistics.
A spike in cases of the more transmissible Delta variant has caused supply chain disruptions for many manufacturers, which could weigh on factory output and add to gloom for an already fragile recovery, he said.
Unlike advanced nations, which promised huge stimulus to assist consumers, Prime Minister Narendra Modi chose to increase infrastructure investment, privatize state enterprises, and implement tax changes to boost mid-term economic prospects, while distributing free foodgrains to the poor.
“If effective, the government’s efforts may set the economy on a high growth path of 7.5-8 percent in the following years,” said N.R. Bhanumurthy, vice-chancellor of Bengaluru Ambedkar School of Economics University, while warning of short-term dangers this year.
(Source – Business Standard)