Green shoots of economic recovery

The Covid-19 pandemic has caused massive disruption in the global economy, many of which are still being felt as countries move in and out of slowdowns and restricted movement. In 2021, we are witnessing a rebound as demand picks up and vaccinations help restore confidence. India, too, is well on its way to growth following a contraction in GDP in 2020-21.

In recent months, the economy has posted encouraging data, indicating a clear and sustained recovery. With the arrival of the holiday season and the opening of the economy leading to increased mobility, the green shoots of a strong recovery are already visible. The vaccination process that went through 1 billion vaccines in October was a great morale booster and in most parts of the country normal activities have returned.

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CII’s business surveys have been very positive and show a strong resilience of Indian companies. Expectations for sales and new orders remain strong, despite rising global input costs and price pressures. In a CII poll last month, around 80% of CEOs believed India would grow over 8% for the year. Two in five CEOs estimated that revenues will increase by more than 20% from fiscal 2020.

The International Monetary Fund’s World Economic Outlook (WEO) report from October 2021 forecasts India’s economy to grow 9.5% in 2021 and 8.5% in 2022. WEOs for India for 2021 and 2022 are the highest in the world for major economies, including developing economies. The Reserve Bank of India (RBI) also kept its forecast for the economy’s real GDP growth at 9.5% for 2021-2022, which is expected to stand at 17.2% for the first quarter of 2022-2023 in due to higher demand, improved investor sentiment and increased capacity utilization.

Leading indicators have categorically moved into positive territory. E-way invoices in October increased by 39% in October 2021 compared to the same month in 2019, revealing the robustness of the movement of goods. This is also reflected in increased GST collections, increased freight and traffic activity with air freight traffic 15% higher than last year, and record growth in UPI transactions. which amounted to Rs.77 trillion in October 2021 compared to Rs. 3.9 trillion in October 2020. Bank credit growth is also on the rise, indicating increased use of capital. All these elements testify to a healthy general dynamic of economic activity.

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The industrial production index is up 12% from the previous year and basic sector production also maintains this pace in the latest data for August. The index has risen above its pre-pandemic level, which is encouraging. The services PMI is at its highest for ten years, also showing good activity in services.

The remarkable performance of India’s external sector is a vital part of India’s renaissance story. A very positive sign is the strong growth of exports and investments. Merchandise exports are growing by around 58% in the first half of April to September this year, to nearly $ 200 billion. Agricultural exports are doing well. Imports are progressing in the same way, increasing by 85% in September alone.

Based on these good results, the government has set a target of $ 400 billion in goods exports this year, which seems achievable. Likewise, FDI data reflects the continued interest of foreign investors in India, reaching $ 26 billion in April-August this year. The sustained growth of FDI is a testament to the confidence of international investors in India’s short- and long-term growth prospects. With many investors planning to make new and additional investments, India’s FDI inflow is expected to remain robust going forward.

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At the sectoral level, the Indian agricultural sector continues to support the economic recovery, with the monsoon which has just ended offering many promising prospects for the farming community. The country has experienced a healthy Rabi planting season, with an increased area as well as adequate rainfall, improved reservoir levels and greater availability of fertilizer.

India’s agricultural exports are also on the rise, registering a 22% growth in the April-August period. Other indicators including rising tractor sales, increasing fertilizer sales, rising sales of two-wheelers, among others, in October reflect sustained rural demand and bode well for the economy. Indian as a whole.

The manufacturing sector is also showing strong green shoots in sectors such as capital goods, durable consumer goods, infrastructure and intermediate goods, where growth has reached a phenomenal level of over 40% for the top five. months of the year. These trends indicate a recovery of the industrial sector in terms of investments as well as a recovery of intra-industrial sectoral demand.

Above all, we are seeing an increase in investments in startups. So far this year, more than 30 tech companies have entered the Unicorn League with a total of 73 achieving this feat.

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The rebound in economic activity is supported by various initiatives undertaken by the government to deal with the fallout from the pandemic. Support for the weaker sections of society and access to credit for small businesses have contributed to economic activity. In addition, measures such as the Production Linked Incentive Program (PLI) aimed at boosting domestic manufacturing and exports in various sectors of the economy have attracted notable investments.

The government has also focused on building infrastructure through programs such as the National Infrastructure Pipeline, Prime Minister Gati Shakti for Integrated Planning and Coordinated Implementation of Infrastructure Connectivity Projects, and the national monetization pipeline to enable private sector participation in government-owned infrastructure facilities. Other reforms and initiatives undertaken by the government in the recent past, including banking sector and tax reforms, will continue to play a crucial role in the process of economic recovery.

There will always be downside risks to watch out for, such as uncertainties from the pandemic and global developments including rising commodity prices, supply chain disruptions and a recent spike in inflation. . We must also keep an eye on the exit of stimulus packages planned by various central banks in key economies. The lessons learned from the global financial crisis have been very useful to the world and better monetary coordination can be expected in the future.

From the point of view of the Indian economy, a high degree of resilience has been demonstrated and the GDP remains on the growth path. The accommodative stance of the RBI and continued financial support for businesses and vulnerable households will help maintain the growth momentum. Given recent positive economic indicators, green shoots are clearly visible and investors are optimistic about India’s medium-term growth prospects.

(The author is the Director General of the Confederation of Indian Industry)

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