India’s economy is recovering faster and is expected to reach the pre-pandemic level by the end of this fiscal, according to the Monthly Economic Review for October by the department of economic affairs (DEA) of the finance ministry, which cautioned that the second wave of pandemic may derail recovery as a breach of social distancing is being seen.
The report cited broader economic indicators to support the assumption.
“Movement of high frequency indicators in October clearly point towards broad based resurgence of economic activity, notably in healthy Kharif output, power consumption, rail freight, auto sales, vehicle registrations, highway toll collections, e-way bills, rebound in GST [goods and services tax] collections and record digital transactions,” the report highlighted.
Manufacturing purchasing managers' index (PMI) rose from 56.8 in September to 58.9 in October, pointing to the strongest improvement in the health of the sector in over a decade. PMI services index also rose to 54.1 in October, ending the seven-month sequence of contraction, signalling improved market conditions.
With the onset of the festive season, overall consumption is also expected to see a further uptick in the coming months, enhancing prospects of faster economic normalization, it said.
Rural consumption has stayed strong, in part helped by sustained minimum support price procurement of food grains by government at higher prices, Indian media reported citing the government document.
Prospect of economic normalisation is also evident in the external sector indicators with consumption of petroleum products increasing in September and exports rebounding strongly with a year-on-year positive growth for the first time in last seven months.
October witnessed some moderation in exports growth, primarily driven by weak oil exports. Cargo traffic volumes have almost reached previous year levels in September driven by healthy growth in traffic of iron-ore, finished fertilizers and containerised cargo, the DEA document added.