The finance ministry on Thursday said that the economy is witnessing optimism in the ongoing quarter led by sustained improvement in high frequency indicators in October and November. It said that there were no fundamental or structural factors responsible for the contraction in the gross domestic product (GDP) by 23.9 per cent in the period between April and June.
The finance ministry’s Department of Economic Affairs (DEA) in its monthly economic review for November said, "The GDP contraction of 7.5 per cent in second quarter underlies a quarter-on-quarter surge in GDP growth of 23 per cent. This V-shaped recovery, evident at the half-way stage of FY21, reflects the resilience and robustness of the Indian economy.”
The fundamentals of the economy remain strong as gradual scaling back of lockdowns, along with the astute support of Atmanirbhar Bharat Mission has placed the economy firmly on the path to recovery. This is in alignment with economic recovery across the globe reflecting a world-wide pick-up in business and consumer confidence, report noted.
Moving deeper into the third quarter (Oct-Dec), there is cautious optimism that global economic uncertainty does not mirror itself in India notwithstanding moderation of a few high frequency indicators late in the month of November.
The downside risk, however, remains the spread of a second wave of Covid-19. However, there is growing cautious optimism that the steep plunges of April-June quarter of the current financial year may not resurface with significant progress in vaccines and contact intensive sectors increasingly adapting to a virtual normal, the report noted.
According to the DEA report, the timely announcement of the third tranche of the Atmanirbhar Bharat package on the eve of Diwali with a multi-sector focus across the labour market, stressed sectors, social welfare, manufacturing, housing, infrastructure, exports and agriculture, was a significant step towards a faster revival of the economy, restoration of lost jobs and creation of new ones.
So, the need of the hour, as stressed by fresh guidelines of Ministry of Home Affairs, is to follow Covid-appropriate behaviour.
“The prospects of a vaccine are encouraging, but we need to remain on guard till it is approved and permeates to a large section of the population,” the report underlined.
Talking about the first two quarters, the report said that the second quarter (July-September), had seen V-shaped recovery as unlocking started.
While the GDP contraction of 23.9 per cent in India in the April-June period can be attributed to the stringent lockdown - it is in alignment with the predictions of global growth in the event of an exogenous unprecedented shock.
On government expenditure, it said that as on November 22, the central government's gross market borrowing during FY21, reached Rs 9.05 trillion, 68 per cent higher than gross market borrowings during the corresponding period of the previous year. This is against the revised target of Rs 12 trillion.
On the revenue side, the gross tax revenue registered a negative growth of 16.8 per cent due to the negative growth in all direct taxes and major indirect taxes, except for excise duties. The excise duty collection rose by 41 per cent during the first 7 months of the fiscal. The non-tax revenue collections fell by 48.2 per cent during April to October, compared to the same period last year.
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