Indian economy picking up at a higher rate than expected
After a bad quarter and the plunge of the Indian economy due to the COVID-19 pandemic, the economy is starting to come back and optimism is setting in people. Indicators like an increase in car sales and higher service sector activities show that the economy is picking up pace at a higher rate than expected.
Data analysis from Bloomberg informs that data due Friday will show gross domestic product declined 8.2 percent in the three months through September. Although this means that this will be the first recession in Asia’s third-largest economy since 1966, this will be a huge recovery from the record 24 percent contraction in the previous quarter.
RBI governor Shaktikanta Das on Thursday at the annual day event of the Foreign Exchange Dealers’ Association of India (FEDAI) conveyed the message that the Indian economy has shown a stronger than expected pickup in recovery. He also added that they should be watchful of the demand sustainability after this festive season pass and that there are downside risks to growth across the world and also in India.
He said, “After witnessing a sharp contraction in the economy by 23.9 percent in Q1 and a multi-speed normalization of activity in Q2, the Indian economy has exhibited stronger than expected pick-up in momentum of recovery.”
Many economists believe that these improvements seen in the last couple of months will continue. Some analysts believe that the country will return to growth as soon as this quarter.
An article by the Hindustan Times reported comments od Rahul Bajoria, the Mumbai-based chief India economist at Barclays Plc who wrote in a report to clients, “While the farm sector remained the bright spot, supported by a good monsoon season and subsidized inputs, we think the recovery likely spread wider across the economy and is on the verge of becoming entrenched.”
He also added, “With cases rising elsewhere, India has fallen off the top in terms of fastest-growing cases as well as deaths.”
Bajoria expects a positive growth this quarter and a full-year contraction at 6.4 percent, which is less than the RBI’s forecast for a 9.5 percent decline.
The Reserve Bank of India has been doing a great job for the betterment of the economy of the country. The central bank has cut interest rates by 115 basis points so far this year, infused liquidity, and transferred billions of rupees in the dividend to the government. However, surging inflation which is above the RBI’s target band of between 2 percent and 6 percent have hindered their efforts.
For the first time in 2020, the income tax collection of September exceeded that of the same month last year. In September goods and services tax (GST) collections crossed Rs 1.05 lakh crore in October.
In October, due to a rise in sales, the IHS Markit Manufacturing PMI rose to 58.9, which is the highest in a decade. In September the IHS Markit Manufacturing PMI was recorded at 56.8.
A research report from SBI Ecowrap shows that the State Bank of India (SBI) revised their second-quarter GDP projection to a contraction of 10.7 percent from a contraction of 12.5 percent earlier.