Finance Ministry lists 14 indicators of economic recovery

The government heralded the “early green shoots of economic revival” in May and June, pointing to higher electricity and fuel consumption, greater movement of goods and an increase in financial transactions.

The finance ministry listed as many as 14 separate indicators across manufacturing, services, finance and agriculture to back this up in a statement entitled ‘Increase in Economic Activity-Improvement in Economic Indicators’ issued on Tuesday, which saw the BSE Sensex breaching the 35,000-point mark for the first time since March 11, closing at 35,430, up 1.5%.

“Early green shoots of economic revival have also emerged in May and June with real activity indicators like electricity and fuel consumption, inter and intra-state movement of goods, retail financial transactions witnessing pick-up,” the ministry said, adding that the strict lockdown and social distancing measures had adversely affected the economy.


It reiterated the government’s commitment to structural reforms and supportive social welfare measures, adding that these will help build on the “green shoots.” Prompt and calibrated policy measures by the government and Reserve Bank of India (RBI) will reinvigorate the economy at the earliest with minimal damage, the ministry said.

India’s economy is expected to contract by as much as 7% in FY21, according to some estimates, with the first quarter seeing a sharp decline. GDP grew at its slowest pace in 11 years at 4.2% in FY20. Industry experts said Unlock 1.0 has made a difference.

“It is indeed heartening to note the improvement in economic indicators in May and June compared to their performance in April,” said Confederation of Indian Industry (CII) director general Chandrajit Banerjee. “The sequential improvement in indicators such as e-way bills, electronic toll collection and financial transactions via NPCI (National Payments Corporation of India) indicate that Unlock 1.0 is proving to be successful in reviving the economy from the impact of the lockdown,” he said.

Activity at below Pre-Covid Levels, say Experts
Independent experts said there were signs of recovery but activity remained well below pre-lockdown levels. The nationwide shutdown was imposed on March 25 to rein in Covid-19, with curbs being eased starting early May.

A number of available lead indicators are pointing toward a modest recovery in May, but the pace of year-on-year contraction is pegged at 18-35% for most of these indicators, said ICRA principal economist Aditi Nayar.

“Sequential recovery in some of these indicators was expected but it was sharper than expected in fuel consumption,” said HDFC Bank chief economist Abheek Barua. He said it would be optimistic to expect a recovery over the same period last year, but it doesn't mean the sequential recovery is not important.

“Only when the lockdown is entirely lifted, including containment zones, and the level of infection is negligible, can a year-on-year comparison be justified. Otherwise, looking at year-on-year data would tend to disappoint,” Barua said. “There should be some seasonal adjustment in the figures, but even in the absence of that, these numbers do indicate the momentum of recovery from the lockdown.”

EY India chief policy advisor DK Srivastava was more optimistic. “These early trends indicate that there is a good chance that the GDP growth may turn out to be positive although at a low level in FY21 if the pick-up is strong, particularly in the third and fourth quarters of the fiscal year,” he said.

REVIVAL INDICATORS
The finance ministry said purchasing managers’ indices (PMI) for manufacturing and services showed that contraction had slowed in May compared with April. Electricity consumption contracted 24% in April, 15.2% in May and 12.5% in the first three weeks of June. By the third week of June, contraction was down to 6.2%. The total assessable value of eway bills more than doubled in May 2020 to Rs 8.98 lakh crore from Rs 3.9 lakh crore in April, but is still lower than the year earlier and pre-lockdown levels. The value of e-way bills generated up to June 19 was Rs 7.7 lakh crore for the month. Consumption of petroleum products rose 47% from 9.94 million metric tonnes in April to 14.65 million metric tonnes in May. The year-on-year contraction in consumption growth of petroleum products was 23.2% in May against 45.7% in April.

“The resilience of the Indian manufacturing is evident from the fact that within a period of two months, India has become the world’s second-largest manufacturer of personal protective equipment (PPE) starting from scratch,” the finance ministry said.

Railway freight traffic improved 26% in May over April and average daily electronic toll collections increased from Rs 8.25 crore in April to Rs 36.84 crore in May and to Rs 49.8 crore in the first three weeks of June.

Total digital retail financial transactions via the National Payments Corporation of India (NPCI) rose to Rs 9.65 lakh crore in May from Rs 6.71 lakh crore in April. “The trend is expected to continue in June driven by a sustained pick-up in real activity,” the statement said.

Private placement of corporate bonds rose 94.1% in May to Rs 0.84 lakh crore compared with a contraction of 22% in April at `0.54 lakh crore.

Average assets under management (AUM) of mutual funds rose 3.2% to Rs 24.2 lakh crore in May from Rs 23.5 lakh crore in April.

“India’s forex reserves at $507.6 billion (on June 12) continue to provide a crucial cushion to external shocks on the back of higher FDI (foreign direct investment), portfolio flows and low oil prices,” ministry said.

SUPPORT FROM AGRICULTURE
The finance ministry also expects a boost from agriculture, given the expectations of timely rain.

“Agricultural sector remains the foundation of the Indian economy and with a forecast of a normal monsoon, should support the rebooting of the Indian Economy,” the statement said.

India is expected to get 103% of its normal rainfall in the ongoing monsoon season.

The government had procured a record 38.2 million metric tonnes of wheat as of June 16. The effort benefited 4.2 million farmers who were paid Rs 73,500 crore in total.

Kharif crop sowing saw a 39% increase to 13.13 million hectares as of June 19 from the year earlier.

This corresponded with an almost 98% surge in fertiliser sales in May over last year at 4 million tonnes, the finance ministry said.