V-shaped recovery on, economy resilient, robust: Finance Ministry report

The Union Finance Ministry’s Monthly Economic Review for November said the Gross Domestic Product (GDP) data for the second quarter suggested that the Indian economy is witnessing a V-shaped recovery and that this reflected the “resilience and robustness” of the Indian economy.

The decline in the GDP narrowed to 7.5% in the second quarter over 23.9% in April-June quarter. “The year-on-year GDP contraction of 7.5% in Q2 of 2020-21 underlies a quarter-on-quarter surge in GDP growth of 23%,” the Monthly Economic Review said.

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“This V-shaped recovery, evident at the half-way stage of 2020-21, reflects the resilience and robustness of the Indian economy,” it added.

The report said 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 of recovery.

‘Global economic uncertainty does not mirror itself in India’

The growth drivers have obtained largest support from agriculture followed by construction and manufacturing, it said.

“Growth in fixed investment along with a gradual increase in private consumption and sizeable contribution from net exports has led the recovery of the Indian economy in Q2. The growth drivers have obtained largest support from agriculture followed by construction and manufacturing. The contact-sensitive services sector has also contributed although mainly through logistics and communication. Services dependent on human mobility and contact will bide their time to reach prepandemic levels before the fear of contagion declines to manageable levels, addressed among others, by the emergence of a vaccine,” it said.

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It said the global economic uncertainty does not mirror itself in India. “Moving deeper into Q3, there is a 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.”

It said that the recently celebrated festive season contributed to a rise in fresh COVID-19 positive cases in India, although numbers have started to decline again, a trend seen in many other countries.

‘High optimism among investors’

In general, global inflation has softened in advanced economies while climbing up further in emerging market economies reflecting a relatively larger impact of supply-side disruptions on economically more challenged countries in the world, it added.

“High optimism among investors however continues unabated as seen in equity markets the world over. With further weakening of US dollar in November, prospects of growth in rest of the world have become stronger.”

It also said India was the preferred investment destination for global investors. “Foreign Direct Investment (FDI) continues to endorse India’s status as a preferred investment destination among global investors as FDI inflow rise more than 10% year-on-year to reach $ 40 billion in the first six months of 2020-21.”