The economic recovery remains “resilient” with sustained improvement in a majority of high-frequency indicators, including record GST collections and exports, despite a surge in Covid-19 cases in recent weeks, the finance ministry said on Monday.
The assertion comes amid mounting fears of a fresh set of restrictions, especially in key states like Maharashtra, that could potentially cause substantial disruption in economic activities. Also, some gauges, such manufacturing PMI and industrial output, have faltered of late.
In its economic report for March, the department of economic affairs stressed “further strengthening in demand conditions”, as reflected in auto sales and power consumption. Monthly GST collections hit as much as Rs 1.24 lakh crore in March, while exports jumped over 58% from a year earlier, albeit aided by a favourable base.
The Centre’s capital expenditure jumped as much as 104.4%, year on year, between October 2020 and February 2021, reversing a 11.6% drop in the first half of FY21, the report said.
The growth momentum in rail freight traffic remains upbeat, port cargo traffic grows from a year before, and domestic aviation picks up further. The digital payment upsurge too continues unabatedly, the report highlighted.
The agricultural sector remains the bright spot of the economy, with grain production hitting 303.3 million tonnes in 2020-21, beating record production levels for a fifth straight year. “MGNREGS has acted as a strong pillar to insulate the rural economy by generating all time high employment of 383.8 crore person days during 2020-21, 44.7% higher compared to previous year,” the report said.
Nevertheless, certain other indicators lost momentum. Manufacturing PMI has hit a seven-month low in March (although it still remains strong). Core infrastructure sectors output contracted by as much as 4.6% in February. Loan growth, while inching up, still remains low at about 6%. After rising in December, output of industrial production declined by 1.6% in January, with a major decline in capital goods (-9.6%) and consumer non-durables goods (-6.8%).
The report highlighted that the fiscal position of the Centre has improved in recent months due to a revival in the economic activities. From April 2020 to February 2021, the Centre’s fiscal deficit stood at Rs 14.05 lakh crore, which is 76 per cent of revised estimate for 2020-21. Net tax revenue of the Centre for FY21 is set to overshoot the RE despite 41% higher income tax refunds this year, it said.
Consequently, an amount of Rs 45,000 crore has been released as additional devolution to states in FY21, an increase of 8.2% over RE.
The report says, as the vaccination drive continuously upscales and guided by the learnings of the country’s management of the pandemic during its first wave, India is “well armed to combat any downside risk posed by the recent surge in Covid-19 cases”. Instrumental in this resilience, will be a strong revival in investment growth aided by the Atmanirbhar Bharat initiative and a massive boost to infrastructure and capital expenditure.
“The wheels of India’s capex cycle have been set into motion, signs of which were imminent in the second half of the year. With the end of a challenging FY 2020-21, the crest of a brighter and self-reliant FY 2021-22 awaits India!,” it said.