Covid spread hits GDP revival
Finance Ministry's report says agriculture likely to cushion shock of pandemic on GDP
New Delhi: The prospects of economic recovery have become fragile in the wake of rise in coronavirus cases and the intermittent lockdowns, according to a Department of Economic Affairs (DEA) report, released here on Tuesday.
The monthly economic report by Finance Ministry's DEA for July said although India was on the path to recovery on the back of support from the government and the Reserve Bank of India (RBI), constant and dynamic monitoring of the situation was required to maintain the momentum.
"The increase in Covid-19 cases and subsequent intermittent lockdowns make the recovery prospects fragile and call for constant and dynamic monitoring," it said.
With major indicators showing improvement, the worst for the economy seemed to be over, it said. According to the report, the push for growth in the coming months will come from rural India. With the forecast of a normal monsoon, agriculture was likely to cushion the shock of the pandemic on the Indian economy in the current financial year (2020-21), it said.
The 'timely and proactive' exemptions from Covid-induced lockdowns to the farm sector facilitated uninterrupted harvesting of rabi crops and enhanced sowing of kharif crops, it added.
"The record procurement of wheat has enabled flow of around Rs 75,000 crore to the farmers, which will boost private consumption in rural areas. Since September 2019, the terms of trade have moved in favour of agriculture and reinforced rural demand," the report said.
It had manifested in an increase in rural core inflation between March and June. As a result, the push for growth in coming months appears to be pitched in rural India, said the monthly economic report.
Pointing at the recent landmark reforms announced in the agricultural sector, it said the deregulated and liberalised the agricultural sector, further, empower the farmers to become a bigger and more stable participant in India's growth journey.
Talking about some parameters showing improvement, the report said, contraction in industrial activity, measured by Index of Industrial Production (IIP) and eight-core industries, has eased in May as compared to April. Industrial output increased across all sectors and sub-sectors within IIP in May as against April.
"Signs of further recovery were witnessed in June with India's Manufacturing PMI improving from 30.8 in May 2020 to 47.2 in June 2020 with output and new orders contracting at much softer rates than seen in April and May," it said.
Services PMI recovered from 12.6 in May 2020 to 33.7 in June 2020, owing to some stabilisation in output levels with around 59 per cent of firms reporting no change in output, 4 per cent reporting growth and 37 per cent reporting reduction since May, it added.
There was also an uptick in infrastructure and construction activities in the unlocking phase, it said, adding, contraction in the production of finished domestic steel recovered from 41 per cent in May to 31.1 per cent in June 2020.