India’s economy is set for an accelerated recovery and reach pre-COVID levels by the end of this year. But with over eight million coronavirus cases, the Finance Ministry has cautioned about the high possibility of a second wave of infections.
In its October report, the Ministry said a steady contraction of active COVID-19 cases and a low case fatality has instilled measured optimism in India that the worst is behind. “At the second time, a second wave of the pandemic in advanced nations is a grim reminder of how reality hits back when caution is compromised,” the report said. “From a trickle in not so distant past to now a sea of humanity coming out on the streets, the people of India have embraced the new normal where self-protection is inseparable from economic activity.”
The Ministry stressed that India stands poised to recover at a fast pace and reach pre-COVID levels by the end of the year, barring the incidence of a second wave that may be triggered by the fatigue with social distancing. It also highlighted the continuous improvement in forward-looking RBI indices of consumption and business sentiment for the coming year augur hope of a strong economic rebound. Moreover, October numbers point towards a broad-based resurgence of economic activity, most notably in healthy kharif output, power consumption, rail freight, vehicle registrations, auto sales, e-way bills and highway toll collections as well as increased digital transactions and GST collections. Acknowledging rural areas, the report said rural consumption has stayed strong, backed by sustained minimum support price (MSP) procurement of food grains by government at higher prices.
In regards to the industries, the Manufacturing Purchasing Managers’ Index rose by two points from 56.98 in September to 58.9 in October, showing a strong improvement in the health of the sector. The report states that the PMI Services rose to 54.1 in October, ending the seven month sequence of contraction. And with the festive season there will be a further uptick in overall consumption, enhancing prospects of a faster economic normalization.