HDFC Chairman Deepak Parekh said since Independence, India has had a recession only 3 times — 1958, 1966 and 1980. (File Photo)

HDFC Chairman Deepak Parekh Thursday said the COVID-hit economy is likely to recover on the back of the rural sector and “signs of the wheels of the economy beginning to churn are evident”.

“Today, the bright spot for India is the rural economy. A good monsoon, strong agricultural growth and government support through rural employment guarantee schemes is enabling rural consumption to lead India’s overall recovery,” Parekh said while addressing HDFC’s virtual AGM.

He said foodgrain production is expected to hit a record high of over 292 million tonnes. Kharif sowing has been healthy too. “Certain sectors are limping back to normalcy, but the strong probability of cycling in and out of lockdowns does remain,” Parekh said.

“My view is that one should not be too perturbed with forecasts of negative GDP growth rates. Most believe India’s GDP growth which was slowing down in the pre-Covid era will contract by about 5 per cent this year,” he said, adding, “recovery will happen assuming no further lengthy and complete lockdowns in future.”

Since Independence, India has had a recession only 3 times — 1958, 1966 and 1980, Parekh said. In each of these years, the reason was the same — a poor monsoon which hit agriculture, and at that time agriculture was a sizable part of the Indian economy, he added.

Parekh said signs of the wheels of the economy beginning to churn are evident from the fact that unemployment rates have tapered down from their peaks in May, e-toll collections are higher as are e-way bills, digital transactions and GST collections are back to Rs 90,000-crore levels. Demand for two-wheelers and tractors have risen, even though passenger and commercial vehicle demand remains subdued, he said.

“It has been an extremely challenging time for everyone … Yet, from the utter despair that the world was in towards the end of March and the month of April since then, there has been a great deal of stability in the financial markets,” Parekh said.

In India, various fiscal and policy measures have ensured that there is adequate liquidity in the system. Interest rates are the lowest in the last 10 years, he said.