Recovery may strengthen further in H2, says Finance Ministry

Recovery may strengthen further in H2, says Finance Ministry

• By Staff Writer

India's economic recovery is expected to strengthen in the remaining quarters of the current fiscal year with the investment cycle kicking off, the finance ministry said, projecting 7% annual growth until the end of the decade.

"India's economic recovery is expected to gain further strength in the remaining quarters of the financial year, as evident from 19 among 22 high-frequency indicators (HFIs) in September, October and November of 2021 crossing their pre-pandemic levels in the corresponding months of 2019," the review said.

"The recovery suggests kick-starting of the investment cycle," it said, pointing to the strength in the housing market. "This uptick augurs well for corporate investments to pick up pace and complement the capex push on infrastructure by government."

This would feed into the backward linkages of cement and steel industries that were already doing well, it said.

The preliminary evidence suggests that the Omicron variant won't be too severe, especially with increasing vaccinations in India.

"The economy is better prepared to work with Covid, with rapidly growing vaccination coverage and lessons learnt from second wave in containing the contagion," the report said. "Nonetheless, going forward, following Covid-19 appropriate behaviour along with ramped-up testing will be critical to shield the country from another wave and subsequent restrictions which may pose downward risk to India's revival story."

Recovery in some indicators such as power consumption, e-way bills, merchandise exports, coal production, rail freight traffic etc. exceeds 100%, which suggests that not only is the recovery complete, but economic growth is steadily gathering momentum over corresponding pre-pandemic levels of output, it stated. Exports and investment have risen 17% and 1.5%, respectively, over pre-pandemic levels, driven by demand recovery. Private consumption has emerged as a macro growth driver for the economy accelerating from 88% in the first quarter to 96% in the second.