India’s growth bucks global trend: Finance Ministry review

Persistent improvements in economic indicators showing V-shaped recovery, it says

While the global economic recovery has been hit by second waves of infections and more stringent lockdowns in several countries, India’s economy is ‘riding against the COVID-19 wave’ with persistent improvements in economic indicators showing a V-shaped recovery, the Finance Ministry said on Tuesday. 

“The new year has dawned with the approval of long-awaited COVID-19 vaccine and initiation of vaccination drives in various countries. This gives strength to the optimism on both health and economic fronts despite continuing surge in global cases and the potential challenge of a mutant strain,” the Department of Economic Affairs said in its monthly economy review for December. 

“In the global economy, rise in lockdown stringency following second waves has slowed down recovery, as seen in tapering Purchasing Managers’ Index estimates, decline in port traffic activity, and stagnating commercial flight activity…,” the review noted, contrasting that trend with India’s recovery path. 

“The effective management of COVID-19 spread despite the festive season and onset of winter season, combined with sustained improvement in high frequency indicators and V-shaped recovery along with easing of lockdown restrictions distinguish Indian economy as one riding against the COVID-wave,” it said. 

Asserting that the government is ready with a plan to undertake a mega vaccination drive, following the emergency use approval for two vaccines in India, the Finance Ministry said a blueprint is ‘ready with priority for health workers among others, real-time Intelligence Network Co-WIN in place, upgradation of cold-chain infrastructure for last-mile delivery, and ongoing dry runs’. 

Vaccine Caveats 

While vaccination drives have begun in Europe, UK and the U.S., the Finance Ministry warned that risks will remain till everyone has been vaccinated and precautions may need to continue even thereafter. 

“The caveat remains that vaccines have only been tested for their ability to prevent infection and not for prevention of transmission. The vaccination would, therefore, need to be accompanied by the observation of all precautionary measures of SMS — social distancing, masks and sanitisation,” it said. 

Yet, the review pointed out that the impending vaccination is ‘set to spur the momentum’ in economic activity globally. 

“India has been experiencing a V-shaped recovery since June when the gradual easing of lockdown restrictions was initiated. The sustained improvement in high frequency indicators ignite optimism of an improved performance in second half of the year,” it said, hoping economic growth would resurface after the first two quarters of 2020-21 recorded a sharp contraction. 

Rural distress reduced 

Stressing that the agriculture sector, which clocked 3.4% growth in the first two quarters of 2020-21 remains the bright spot of the Indian economy, the review pointed to a 2.9% rise in rabi sowing this year along with accelerating tractor sales, to suggest rural distress has been successfully addressed by the PM Garib Kalyan Yojana (PMGKY). 

“Rise in minimum support prices accompanied by record procurement, and accelerated wage employment generation through MGNREGS, bodes well for rural incomes and bears testimony to PMGKY’s success in alleviating rural distress. This rise in rural incomes is mirrored in the healthy, though moderated, sales in passenger vehicles, two and three wheelers and tractor, and a rebound in vehicle registrations for the first time after March 2020,” the review said. 

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