As we ring in the New Year, questions that come to our mind are: what is the scorecard of the economy? Whether the economy is on the path of sustainable recovery? And what are the challenges ahead?
There are enough indications that, having put behind the devastating impact of the first and the second wave of the pandemic, the Indian economy is scripting a strong rebound. This is borne out from the latest GDP print which shows that the economy has notched an impressive 8.4 per cent expansion during Q2 2022.
Even though powered by a low base, the GDP number is remarkably robust and broad-based which demonstrates our resilience to bounce back from a catastrophic situation. The other macroeconomic lead indicators also provide much room for optimism.
GST collections at Rs 1.31 lakh crore in November 2021, signal a revival of consumption expenditure. Similarly, the PMI for November shows that manufacturing activity has recorded the fastest growth rate in the last 10 months due to rising demand and improved market conditions.
At the same time, the core sector is doing well, gross fixed capital formation has improved, inflation is within the comfort zone, current account situation is sanguine; bank credit is rising, and our services sector activity has picked up pace both in the first and the second quarter of 2021-22.
What is notable is the impressive performance of India’s external sector, which has a salutary effect on our revival story. Merchandise exports have bounced back to achieve a spectacular 51 per cent growth during April-November 2021, at almost $264 billion. Exports of petroleum products have done exceedingly well, having climbed by 154.22 per cent in November while exports of engineering goods rose to nearly $8 billion during the month, recording an increase of 37 per cent against the same month last year. With this strong showing, the target of $400 billion set by the Government is well within reach.
Data for FDI indicates that India continues to be regarded as an attractive destination for business, having reached $48 billion in April-October this year.
With the present government articulating a new vison for the Indian economy and positioning an investment friendly climate for business, many companies are evincing interest and looking at avenues for making investments in the country.
At the sectoral level, our agriculture sector has printed stellar growth, laying the ground for supporting the growth revival and strengthening rural demand.
The country is witnessing a healthy increase in kharif production and the record procurement of wheat and paddy augers well for the sector.
With such positivity and more, India’s GDP is poised to post a respectable rate of 9.5 per cent growth this fiscal which will surpass that of China, according to the IMF. The RBI has also forecast a growth rate of 9.5 per cent for 2021-22 on the back of higher demand and a palpable upturn in investor sentiments.
The article first appeared in the Deccan Herald on 2nd January, 2022