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Special: India heading for V-shaped recovery?

Dubai - India’s $2.94 trillion economy has witnessed a quarter-on-quarter growth of 23% in the July-September.

The International Monetary Fund said on Thursday that India’s economy, the world’s fifth largest, is gradually recovering, subtly endorsing a rather upbeat view of a V-shaped recovery projected by Finance Ministry in its latest forecast.

According to the Finance Ministry's Monthly Economic Review, India’s $2.94 trillion economy has witnessed a quarter-on-quarter growth of 23 per cent in the July-September quarter of this fiscal ending March 31, 2021.

The bullish forecasts by both the IMF and the Finance Ministry come in the wake of a faster than expected rebound in the September quarter. A pick-up in manufacturing helped the economy clock a lower contraction of 7.5 per cent over 23.9 per cent in April-June quarter, holding out hopes for further improvement on better consumer demand.

"The year-on-year GDP contraction of 7.5 per cent in Q2 of 2020-21 underlies a quarter-on-quarter surge in GDP growth of 23 per cent,” the Monthly Economic Review said.

"This V-shaped recovery, evident at the half-way stage of 2020-21, reflects the resilience and robustness of the Indian economy. The fundamentals of the economy remain strong as gradual scaling back of lockdowns, along with the astute support of Atmanirbhar Bharat Mission has placed the economy firmly on the path of recovery," the Monthly Economic Review for November said.

The report said there is cautious optimism that global economic uncertainty does not mirror itself in India notwithstanding moderation of a few high frequency indicators late in the month of November.

"India has indeed been severely affected by the pandemic but is gradually recovering," IMF chief spokesperson Gerry Rice said in Washington.

Fiscal, monetary, and financial sector measures announced to date provided much-needed support to the economy, including businesses, agriculture, and vulnerable households, Rice said in response to a question on the IMF’s assessment of India’s economy during the coronavirus pandemic.

"To further support growth, we believe the Indian authorities should prioritize swift implementation of the existing support programs and may need to consider expanding their scope, as warranted," Rice said.

Finance Minister Nirmala Sitharaman in her recent virtual address to the International Monetary and Financial Committee (IMFC), said that a V-shaped pattern of recovery is being seen in several high-level indicators.

India’s Chief Economic Adviser Krishnamurthy Subramanian has said there is scope for fiscal spending in the remaining months of this financial year. He said enhanced fiscal space could be used to push demand by focusing primarily on infrastructure. However, the CEA expressed caution about a possible second wave of Covid which may adversely impact the economy even without a lockdown.

Stressing that fiscal spending is important to push demand to bring the economy back into its vitality, he said, “I would say there is scope for fiscal spending in the remaining months especially given the fact that India is going to have a current account surplus.”

- issacjohn@khaleejtimes.com