Several positive signals are emerging on the economic front in the post-pandemic period. According to the NSO data the real GDP growth for the first quarter of 2021-22 is somewhere around 20 per cent. The RBI has also projected the real GDP growth at 9.5 per cent for 2021-22 while PMI manufacturing accelerated to 53.7 in September 2021. FDI inflows into the country also remained robust with India reporting the highest inflow of 3 billion dollars in September. On the employment front, monthly analysis by specialist staffing firm Xpheno showed that September closed at 2,85 000 active white-collar jobs with a marginal 3 per cent growth over August this year and growing 60 per cent from 1,76,000 jobs in September 2020.
The finance minister remarked that the government is not planning to withdraw the pandemic stimulus package anytime soon although the Indian economy has been growing fairly robustly as against what was expected. As a result, we are coming in tune with the forecast made by various agencies including the RBI, ADB, World Bank and IMF, where the projections were between 9 ½ per cent to 10 ½ per cent GDP growth rate. Fortunately, if you look at the RBI monetary policy reviews which were issued last 2 times and even the recent clearly shows that the inflation is also fairly under control where it has gone down to 4.35 per cent for the current one which is against what was expected to be a little higher than this by various agencies including the RBI. The Foreign Direct Investment (FDI) has crossed a chunk of about 80 billion dollars in the last 1-1½ half-year, roughly about 73-74 billion in last year itself, that was 2020-21 which is about 6.5 billion dollars per month which is a huge chunk of money especially in times when Covid has taken over the world and the world is striving, financing itself through fiscal spending. Despite that, the international agency, companies were investing in India and this is the highest of the last 4-5 years of investment in India. Look at the foreign institutional investment itself, the portfolio as we call it, which is a little liquid in nature that also grew by about 35 billion dollars last year which was the highest of the last 7 years.
So, India fortunately, has shown that robustness, when we look at some of the international agencies, they have also recognised this and they recognise the fact that the banking sector which is always in question for the last 3-4 years primarily due to the NPAs which were rising has been benefiting, the risk factors have reduced. A large number of sectors have been indicating profitability like the automobile sector, shipping sector, healthcare sector various other sectors have shown a huge amount of profitability which is in tune with the GST collection. So overall there is a positive outlook on all fronts which is being recognised within the country and internationally. The vaccine which the government is providing to a large number of people is giving them the confidence to move back the engine of growth in this country and bringing back normalcy to life and obviously, that gives a push to the economic growth also.
The data is now telling us that the recovery has set in, it seems to be fundamentally strong and the government should continue to do this, free up the supply side, keep the money with RBI, keep the money taps open, spend on infrastructure. The entire economy has been in distress, it was for the government to open up the fiscal taps. This gap during Covid has given the space for even the private sector to rework its costs, rework its business models and in tandem, a lot of the cleanup which has happened over the last 2-3 years is telling that this recovery is strong, it’s got fundamental roots and it should sustain if the government, RBI and the private sector all continue to work in tandem. And just to be very clear this recovery that we are seeing has not happened by accident or something where India got lucky, this has been part of a plan. Everyone took a risk in terms of dealing with a back ending government spending rather than front-loading it and that policy decision seems to be paying off. We will have to wait for the next few quarters to see whether or not private investment comes in & we are on track.
The National Infrastructure Pipeline the ‘Gati Shakti’ project unveiled recently is step towards creating an ecosystem for promoting economic growth. Yes, there are some challenges, like getting digital equipment because of chip shortage and the lack of pre-ordering but on the whole, the industry is looking forward to reviving demand.
This is the festival season; a lot will depend on how the next 3-4 weeks actually play out and if the demand is as anticipated then we would actually see more investment & FDI coming. The way the economic recovery is moving ahead, the data and the evidence points out that the fundamentals of our economy are quite strong, the pragmatic decision both by the government and by the central bank is also adding value to that recovery path. All we need to do is continue on that recovery path.
(The author is an Advocate by Profession)
