INDIAN economy, which had sunk to a record low during the lockdown months and contracted by 7.5 per cent in the July-September quarter, is on the road to recovery — stronger than expected, according to RBI Governor Shaktikanta Das. After a GDP contraction of 23.9 per cent during April-June, the ongoing quarter has witnessed green shoots: in October, a key manufacturing index rose to 58.9, the highest since mid-2008; the GST collections crossed the Rs 1 lakh crore mark for the first time in the current financial year; the country’s power consumption grew by over 13 per cent compared to the corresponding month last year. However, the revival of industrial and commercial activities is attributable less to a series of Atmanirbhar Bharat stimulus packages announced by the Centre than to other factors — easing of restrictions, pandemic fatigue, the festive season.
It’s the resilience of consumers and investors that has spurred demand of late. Those who were saving and scrimping after the outbreak of Covid-19 are now spending to meet their pent-up needs and wants. But the increased consumption may reach saturation soon. Das has sounded a note of caution about ‘the sustainability of demand after the festivals and a possible reassessment of market expectations surrounding the vaccine.’
Exports remain a major cause for concern. India has not been able to capitalise on the US-China trade war to cement its place in the global supply chain. The decision to stay out of the China-backed Regional Comprehensive Economic Partnership (RCEP) has deprived India of access to a huge market with reduced tariffs, which could have been beneficial in the post-Covid scenario. The RCEP, the world’s biggest trade agreement, accounts for 40 per cent of the global GDP and 50 per cent of the world’s population. With the US and Europe continuing to grapple with the pandemic, India’s export options have shrunk considerably. On the domestic front, the government needs to act fast to resolve the banking crisis. The unrest and uncertainty in the agriculture sector — the mainstay of the country’s rural economy — over the contentious farm laws, also warrant immediate attention. The disruptions, if not prevented, may derail the engine of growth.