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Approvals for vaccines and the sustained performance of high frequency indicators have brightened the prospects of economic recovery gathering speed in the second half of 2020-21, a Finance Ministry report said on Tuesday.
High frequency indicators include GST collections, Purchasing Managers’ Index, e-Way bills generated and industrial performance.
“The approval of the vaccines across the world has ignited optimism for economic recovery in the new year. Post-vaccination, the resumption in economic activity and increased mobility are expected to lead towards a path of economic recovery in the aftermath of the Covid-19 pandemic,” a report prepared by the Economic Affairs Department said.
It said India has been experiencing a V-shaped recovery since June when the gradual easing of lockdown restrictions was initiated.
Two vaccines approved
The report comes at a time when two vaccines have been appoved in India and the inoculation driveis expected to start soon. At the same time, on the economic front, GST collections touched an all-time high of ₹1.15-lakh crore in December while e-Way bills’ generation touched 6.42 crore. PMI for manufacturing rose to 56.4 in December, remaining well above the critical 50 threshold for the fifth straight month.
According to the report, industrial production growth ran parallel to the festival fervour of October and rose to an eight-month high, led by manufacturing and electricity sectors. The core industries registered slight contraction in November, driven by natural gas and cement, while coal production, electricity and fertilizers’ production registered growth. Steel production showed sequential growth with consumption of the key metal recording a high year-on-year growth, indicating an acceleration in the construction sector.
The report claimed that the growth momentum in rail freight traffic remains upbeat; passenger earnings have begun to recover; port cargo traffic has shown growth on an yearly basis, and domestic aviation is picking up. Digital payments continued to surge, powered by resumption of economic activity, financial inclusion through Aadhaar-enabled payment systems and behavioural shift in consumers.
Retail inflation was down in November and is now below 7 per cent. However, producers’ inflation, as reflected by the Wholesale Price Index (WPI), rose a bit, though it is still below 2 per cent.
Support to States
The Centre’s persistent support to States to enable economic recovery can be seen in the sustained fiscal support despite the decline in revenues, opening of a special window for States to borrow to meet GST shortfall and additional borrowing limits for adopting State-level reforms. The Centre’s fiscal deficit stood at 135.1 per cent of the Budget Estimate from April to November. As on December 25, the Centre’s gross market borrowings during FY21 reached ₹10.27 lakh crore (compared to States’ ₹5.37 lakh crore), witnessing a 66.2 per cent yearly growth. States’ borrowing registered a growth of 42.1 per cent.
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