India’s economy is leaving the recession and the recovery is picking up speed
© Reuters. Commuters wearing protective face masks ride a suburban train in Mumbai
From Manoj Kumar
NEU-DELHI (Reuters) – India’s economy is back on track for growth in the third quarter of the fiscal year after a recession at the beginning of 2020. The recovery is set to accelerate as consumer demand and investment shake off the effects of the pandemic, according to economists.
The gross domestic product grew from October to December by 0.4% compared to the same period last year, as data from the National Statistics Office on Friday showed. This compared with revised contractions of 7.3% in July-September and 24.4% in April-June.
Analysts in a Reuters poll had forecast growth of 0.5% for the third quarter of the fiscal year ended March 31.
India also revised annual GDP estimates for the fiscal year, forecasting a 8.0% decline, lower than an earlier estimate of -7.7%.
Economists have raised their projections for the current fiscal year and 2021-22, anticipating an upturn in government spending, consumer demand and a resumption of most of the economic activity curbed by the COVID-19 pandemic.
“We expect the economy to reach pre-pandemic production levels by the end of calendar year 2021,” said Sakshi Gupta, senior economist at HDFC Bank, adding that the economy will grow 1.5% in the March quarter could.
Industries like retail, airlines, hotels and hospitality are still affected by the effects of the coronavirus pandemic.
Agriculture’s 3.9% annual growth and 1.6% manufacturing growth in the three months to December raised hopes of an early recovery as the government plans to distribute COVID-19 vaccines to the 1.4 billion Brings people in India on the way.
Prime Minister Narendra Modi’s government earlier this month launched plans to fund a major vaccination campaign and outlined a range of tax incentives to boost production.
The Reserve Bank of India (RBI), which has reduced its repo rate by a total of 115 basis points since March 2020 to cushion the economic shock of the pandemic, has forecast growth of 10.5% for the financial year beginning in April.
The central bank left the repo rate unchanged at 4% earlier this month. The growth prospects have improved and inflation should remain within the RBI target range for the next few quarters.
However, some analysts warn that recent price hikes and spikes in COVID-19 cases in parts of the country could pose a risk to the looming recovery.
(Additional coverage of Aftab Ahmed, Nidhi Verma in NEW DELHI, Swati Bhat in Mumbai and Anuron Kumar Mitra in Bengaluru; editing by Catherine Evans)
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