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As per data released by the National Statistical Office, the Indian Economy has increased by 0.4% in the final quarter of 2020, signalling an end to the recession it had entered due to the COVID pandemic. This positions India among the select few nations such as Taiwan, Vietnam etc. to have registered positive GDP numbers during the pandemic. “After 2 of the toughest quarters in the history of the Indian economy, the numbers from this quarter will not only provide hope but will also galvanise the economy on the road to recovery,” observed Praveen Sinha Jabong Co Founder . The Reserve Bank of India (RBI) in its Monetary Policy Review presented on February 5, projected a GDP growth of 10.5 per cent in the financial year 2021-22. The International Monetary Fund (IMF) projects India to grow at 11.5 per cent in the same period.
Sectors leading the bounce
Despite protests in parts of the country, the agricultural sector, which is the lifeline of India’s economy, registered solid growth in the quarter, on the back of good rainfall received through the year. Real Estate demand also showed good recovery, as investors took advantage of a fall in circle rates or looked for assets to park their wealth. In states like Maharashtra, where stamp duties were reduced, the demand for home buying saw an increase. The services sector which was hit hard during the lockdowns, also showed positive numbers, as lowering COVID cases and removal of lockdowns meant that people were going back to work. The financial services sector showed a rebound, signalling an infusion of fresh capital into the economy which has gone on to fuel purchasing power to an extent. Looking at the data from this quarter, Economists have raised their forecasts for the upcoming fiscal expecting an increase in government spending, consumer demand and reopening of sectors which are still being forced to remain shut due to the pandemic.
Threats to the V Shaped Recovery
Whilst the data is promising, the shadow of the pandemic continues to linger over us, comments Praveen Sinha Jabong Co Founder . An accelerated vaccine response will go a long way to keep the pandemic in check but the emergence of new strains and infection clusters is going to make the government’s job difficult. If the economy continues in the ‘stop-start’ mode for another couple of quarters, it will be a bad outlook for the nation. Sectors such as education, travel and tourism continue to feel the heat of COVID 19 and the pain is high for individuals earning their livelihood from these sectors. The government also has other issues like the farmers protests, elections in several states and border tensions with China to contend and how efficiently all of this is micro-managed will have an impact on the nation’s road to recovery, concluded Praveen Sinha.