FinMin says economic recovery gaining momentum; probable growth path is visible

With enactment of three legislations each in farm and labour sector besides other structural reforms, the Finance Ministry feels India’s probable growth path is visible now. Also, it says economic recovery has gained momentum.

“The sustained spread of the virus poses a downside risk to short-term and medium-term growth rate. To combat these risks, the Government has strategically undertaken various important structural reforms encompassing various sectors. These will strengthen the fundamentals of the economy towards a strong and sustainable long-term growth,” Economic Affairs Department said in its monthly report which was made public on Sunday.

During September, three key farm sector legislations - the Farmers Produce Trade and Commerce (Promotion and Facilitation) Act, the Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Service Act and the Essential Commodities (Amendment) Act, 2020 came into effect. Along these, three labour codes - Industrial Relations Code, Occupational Safety, Health & Working Conditions Code and Social Security Code - joined Code on Wages to subsume 44 Central Laws into four laws and ease the compliance burden beside bringing new welfare measures for the workers. The Government has already modified the definition of MSME (Micro, Small and Medium Enterprises) to make them more competitive.

“The enabling policy environment and initiatives taken by all stakeholders to seize the available opportunities will actualise the growth potential of the Indian economy,” the report said. It quoted S&P Global Ratings’ latest review which retained India’s investment grade (BBB-) credit rating with a stable outlook as it expects the country’s economy and fiscal position to stabilise and begin to recover from 2021 onwards.

Highlighting the performance of high frequency economic indicators, the report mentioned that production of Kharif foodgrains in 2020-21 estimated to go past the previous year’s level. The growth of demand in the rural sector is reflected in the registration of two-wheelers/three-wheelers/passenger vehicles along with tractor sales reaching/surpassing previous year levels in August.

Increase in global demand has led to the expansion of India’s export at 5.3 per cent in September on a year-on-year basis. The recovery in rail freight enabled revenue earnings clocking positive year-on-year growth for the first time since March in August and early September. Easing of inter-state movement restrictions, quarantine policy and unlocking were accompanied with recovery in Rail Passenger Earnings as well.

Power consumption in September has now crossed previous year levels have grown at an encouraging rate of 4.6 per cent. At an eight-year high of 56.8 in September 2020, India’s manufacturing purchasing managers’ index augurs well for economic expansion in the coming months. GST collections, also reached ₹95,480 crore in September, going past the previous year level by 3.9 percent for the first time this fiscal year. As on September 25, India’s foreign exchange reserves stood at US$ 542.02 billion, equivalent to more than 13 months of imports and offered a comfortable buffer to provide for the surge in imports following acceleration in the pace of economic activity.

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