The finance ministry has expressed its optimism for the growth of the Indian economy and has positively maintained that mild rise in COVID-19 cases has not dented consumer spending sentiments. Finance ministry, in its monthly review of the economy, has stated, that Indian economy is likely to do better than the earlier projection of an 8% shrinkage for the current fiscal.
The ministry had in January estimated the economy to shrink by a significant 7.7%. The revised estimates by the finance ministry come at a time when economic activity is gathering pace with mild stiffening of pandemic curve and the rollout of vaccines, which on the contrary has bolstered the consumer spending sentiments.
Finance ministry in its monthly review of the economy stated, “Economic activity in India has gathered pace and the financial year could end better than projected in the second advance estimates of gross domestic product (GDP) released last month”.
The monthly review further stated, “ positive GDP growth in Q3 of FY-21- for the first time since the onset of the pandemic- adds to the positive sentiment as the economy is set to close the year with activity levels higher than measured in the second advance estimates of GDP”. The Department of Economic Affairs compared global output with indigenous numbers and presented a positive outlook stating that the recovery of global output has slowed following the re-imposition of lockdowns in advanced countries (like UK) amid renewed Covid-19 waves and its emerging variants. However, economic activity in India has gathered momentum with mild stiffening of the Covid-19 curve.
Chairman of the EAC, Bibek Debroy has articulated his confidence and stated, “the worst of the COVID-19 crisis, economic activity wise, is over.” The finance ministry has also expressed its positiveness by indicating towards a ‘V shaped recovery’, which it believes began in the 2nd quarter.
The report further stated that, “GDP growth is expected to be in the positive territory in the second half of 2020-21, on the back of higher government expenditure, moderated contraction in private consumption and net exports emerging out of dismal retrenchment.”
While India continues to avoid the second wave of the pandemic, there has been reports of despicable resurge in cases in eight states namely Maharashtra, Kerala, Punjab, Tamil Nadu, Gujarat, Madhya Pradesh, Karnataka and Haryana.
The report further added that the Reserve Bank’s industrial outlook survey conducted in Q3 of FY-21 has also reaffirmed this optimism, with respondents indicating a strengthening of production, order books and employment during the third quarter, driven by easing of lockdowns, re-opening of businesses and improvement in the availability of finance from banks (due to its accommodative stance).
Additionally ICICI bank, a private sector lender has cut home loan rate to 6.7% , lowest in decade. Thus, the growth-oriented budget is all set to revive the economy, but will the consumer pro spending sentiment with burgeoning inflation and inflating crude prices sustain? The topic certainly demands insightful deliberation and caution by the finance ministry.