Indian economy is witnessing a V-shaped recovery: Finance ministry

NEW DELHI:  The Indian economy is witnessing a V-shaped recovery, which is evident from the latest numbers which shows that global uncertainty is not mirrored in India, the finance ministry said in its economic outlook report for November. 

“The year-on-year GDP contraction of 7.5 per cent in Q2 of 2020-21 underlies a quarter-on-quarter surge in GDP growth of 23 per cent. This V-shaped recovery, evident at the half-way stage of 2020-21, reflects the resilience and robustness of the Indian economy,” said the report released Thursday.

The sustained improvement in high frequency indicators in October and November ignites optimism of an improved performance in October-December quarter (Q3) of FY21, it added. Gross Domestic Products (GDP) for the second quarter ending September released earlier showed contraction of 7.5 per cent, lower than economists’ estimate and also in comparison to GDP contraction during April-June quarter (Q1).

The growth drivers for the economy have been agriculture, construction and manufacturing, the report stated. On the weak spots, the report pointed out that “services dependent on human mobility and contact will bide their time to reach pre-pandemic levels before the fear of contagion declines to manageable levels, addressed among others, by the emergence of a vaccine”. 

The finance ministry further added that the fundamentals of the economy remain strong but warned that the downside risks include the spread of a second wave of Covid-19 cases, even though it will be not as steep as April to June quarter. “There is a growing cautious optimism that the steep plunges of April-June quarter of 2020 may not resurface with significant progress in vaccines and contact intensive sectors increasingly adapting to a virtual normal,” the report noted. 

Rating agencies revise growth forecast

The economy was forecast to contract by 10-12 per cent in 2020-21. But after some signs of improved economic parameters, rating agencies have revised their forecasts upwards. Moody’s expects a narrower contraction of 10.6 per cent now, versus 11.5 per cent.