India’s recovery is likely to be gradual as efforts towards reopening the economy are confronted with rising infections, said Reserve Bank of India (RBI) Governor Shaktikanta Das.
“The August-end press release of the National Statistics Office (NSO) was a telling reflection of the ravages of Covid-19.
“Nevertheless, high frequency indicators of agricultural activity, the purchasing managers’ index (PMI) for manufacturing, and private estimates for unemployment point to some stabilisation of economic activity in Q2 (July-September), while contractions in several sectors are also easing,” said Das in his address to members of industry body FICCI.
The recovery is, however, not yet fully entrenched and moreover, in some sectors, upticks in June and July appear to be levelling off, he added.
As per the NSO press note of August 31, India’s GDP contracted 23.9 per cent in the April-June (Q1) period of FY21 when compared to 5.2 per cent growth in Q1 of FY20. This contraction came amid an unprecedented shock from the ongoing pandemic.
Das observed that the immediate policy response to Covid in India has been to prioritise stabilisation of the economy and support a quick recovery. Polices for durable and sustainable high growth in the medium-run after the crisis, nevertheless, are equally important, he added.
The Governor felt that five areas – (i) human capital, in particular education and health; (ii) productivity; (iii) exports, which is linked to raising India’s role in the global value chain; (iv) tourism; and (v) food processing and associated productivity gains – will determine India’s ability to step up and sustain its growth in the medium-run.
“The private business sector has a critical role in each of the five areas...The enabling policy environment would evolve around the initiatives taken by India’s businesses to seize these opportunities and actualise the potential of the Indian economy as a rising economic power of the 21st century,” said Das.