AgenciesThe Indian economy is likely to see positive growth in the October-December quarter based on buoyant high frequency indicators so far, according to consultancy firm Ernst and Young (EY).
Domestic demand was seeing a recovery as the economy had almost entirely exited from the lockdown phase, said DK Srivastava, in the November edition of EY’s Economy Watch report on Tuesday.
The Reserve Bank of India had also projected a positive growth in the third quarter of FY21, but a lot would depend on the official growth figures for the second quarter, which will be released on November 27 by the Central Statistics Office.
The EY report highlighted the strong growth shown in manufacturing activity in October, with the manufacturing Purchasing Managers’ Index (PMI) touching a decade high of 58.9. Similarly, the services sector posted its first month of growth in activity with the services PMI for October at 54.1 along with other indicators of growth like Goods and Services Tax collections crossing the Rs 1 lakh crore mark during that month.
Debt-to-GDP
EY undertook a review of debt-to-GDP ratios across nine countries from 199 to 2019 to understand how various crises affected government debt levels and in order to better understand how the pandemic would impact debt levels going forward.
“This review indicates that major economic crises have led to one-time upsurges in the debt-GDP ratios. These tend to remain at high levels well after the crises are over showing downward rigidity,” the report said.
From 92.2% in 1996, India’s debt-to-GDP ratio grew 35.4% to hit 127.6% in 2019, it said.
“We find that the projected debt shock caused by Covid-19 may turn out to be much higher than that experienced in the 2008 crisis,” the report said, projecting India’s public debt to jump 16.6 percentage points in 2020 to reach 88.9%.
In line with its findings of downward rigidity of the figure, EY said the debt-to-GDP level would increase to 89.8% in 2021.
Domestic demand was seeing a recovery as the economy had almost entirely exited from the lockdown phase, said DK Srivastava, in the November edition of EY’s Economy Watch report on Tuesday.
The Reserve Bank of India had also projected a positive growth in the third quarter of FY21, but a lot would depend on the official growth figures for the second quarter, which will be released on November 27 by the Central Statistics Office.
The EY report highlighted the strong growth shown in manufacturing activity in October, with the manufacturing Purchasing Managers’ Index (PMI) touching a decade high of 58.9. Similarly, the services sector posted its first month of growth in activity with the services PMI for October at 54.1 along with other indicators of growth like Goods and Services Tax collections crossing the Rs 1 lakh crore mark during that month.
Debt-to-GDP
EY undertook a review of debt-to-GDP ratios across nine countries from 199 to 2019 to understand how various crises affected government debt levels and in order to better understand how the pandemic would impact debt levels going forward.
“This review indicates that major economic crises have led to one-time upsurges in the debt-GDP ratios. These tend to remain at high levels well after the crises are over showing downward rigidity,” the report said.
From 92.2% in 1996, India’s debt-to-GDP ratio grew 35.4% to hit 127.6% in 2019, it said.
“We find that the projected debt shock caused by Covid-19 may turn out to be much higher than that experienced in the 2008 crisis,” the report said, projecting India’s public debt to jump 16.6 percentage points in 2020 to reach 88.9%.
In line with its findings of downward rigidity of the figure, EY said the debt-to-GDP level would increase to 89.8% in 2021.
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