Indian Economy Hovers around FY20 Level

While the Indian economy has recorded an impressive recovery from the lows it suffered at the start of the COVID-19 pandemic, the situation remains volatile as it hovers around the same levels of FY20, stated a report from Anand Rathi Share and Stock Brokers Limited. India’s real GDP was Rs 35.7 trillion in September 2021, compared to Rs 33.0 trillion in September 2020 and Rs 35.6 trillion in September 2019. India’s economy had suffered the biggest contraction in recent years in June 2020, when it shrunk to Rs 27 trillion, compared to Rs 38.3 trillion in March 2020. At the same time, the underlying volatility of the market can be highlighted by the fact that despite the start of the second wave, real GDP hit an all-time high of Rs 38.3 trillion in March 2021. The economy is showing signs of recovery in various economic activities. Financial transactions are up compared to pre-pandemic levels, and so is the use of energy. The movement of passengers, however, is still down. In terms of industry break-up, manufacturing, capital goods and durables were all below their pre-pandemic levels, while electricity, intermediate goods and infrastructure had seen strong growth despite the pandemic. The report states that “supporting growth would be the key focus of the Budget.” Some of the major initiatives expected from the upcoming budget are special measures to stabilise growth through supportive fiscal policies, improving farm prices with aggressive MSP hikes, and food subsidies. Other expected special measures include increased spending on healthcare, and education, boosting rural income through rural infrastructure and job creation, helping the MSME segment, and supporting consumption. However, no major reforms are expected and schemes like Make in India, Atmanirbhar Bharat and Production Linked Incentive (PLI) schemes are expected to be continued. Tax compliance will be on the radar, with selective rise in GST rates on the horizon.