Finmin report: Economy on recovery path, Covid case load may have peaked

Finmin report: Economy on recovery path, Covid case load may have peaked

The upcoming festive season is expected to further accelerate this momentum across several sectors, it said, reiterating that the government is open to taking further measures to soften the Covid blow.The upcoming festive season is expected to further accelerate this momentum across several sectors, it said, reiterating that the government is open to taking further measures to soften the Covid blow.

The economy is on a recovery path and the upcoming festive season may add to the momentum, although the sustained spread of the Covid-19 virus poses a downside risk to short-term and medium-term growth rates, the finance ministry said in its monthly economic report for September released on Sunday.

Nevertheless, data over two weeks through September 30 suggest India “may have crossed the peak of Covid-19 case-load”, the report said. During this period, the seven-day moving average of daily positive cases has steadily declined from about 93,000 to 83,000 while the seven-day moving average of daily tests has risen from about 1,15,000 to 1,24,000. “The pandemic, however, is far from over,” it said.

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Amid a political slugest over two farm Bills, the finance ministry report insisted the reforms in the agricultural sector were “more overdue than even the labour reforms as the existing laws kept the Indian farmer enslaved to the local mandi and their rent-seeking intermediaries”.

“The local monopolists created by this legal infrastructure enabled the intermediaries to prosper at the cost of the farmer, especially the poor ones without the wherewithal to store their produce,” it said. The farm sector reforms enable the farmer to sell where he gets the best deal.

The upcoming festive season is expected to further accelerate this momentum across several sectors, it said, reiterating that the government is open to taking further measures to soften the Covid blow.

“With India unlocking, demand resurgence is palpable in many sectors….This is despite headwinds of increasing Covid cases in non-metro cities and rural areas and rising food prices,” it said.

Several high-frequency indicators like PMI data, GST mop-up, toll collections, e-way bills, power consumption and auto sales have shown an uptick in September. The rebound signals pent-up demand and points at further recovery prospects for manufacturing, according to the report.

The GST collection in September touched Rs 95,480 crore, up 4% from a year before, while the manufacturing PMI index hit its peak in over eight years last month. Exports grew 5.3%, year-on-year, in September, rail freight revenue earnings were up by 13.5% and power consumption grew 4.2%. Other indicators like e-way bills, kharif sowing, cargo traffic and passenger vehicle sales, too, showed upward movement. Agriculture remains the “sweet spot” and the growth of which will continue in the coming months.

The ministry exuded confidence that positive results from implementation of the Rs 21-lakh crore Atmanirbhar Bharat package and graded unlocking of the economy have caused the recent turnaround in high frequency indicators. “All this makes the ministry confident that its effort to mitigate impact of Covid-19 are on the right track towards faster recovery of economy to normalcy,” the report added.

A number of established agencies have projected a steeper GDP slide (some expect it to be as much as 15%) in FY21 than assumed earlier, after the government announced a record 23.9% contraction, the sharpest among the G-20 economies, in the June quarter. While most agencies have predicted a recovery in FY22 (S&P projects a 10% expansion next fiscal), some of them have cautioned that it will be greatly aided by a favourable base and a meaningful rebound will take time to materialise.

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