Economy witnessing sharp V-shaped recovery, need to re-orient policy matrix: DEA

With gradual unlocking of Covid-19 restrictions, the worst seems to be over as high-frequency indicators show improvement from the unprecedented trough the economy had hit in the first quarter, according to the latest monthly report released by Ministry of Finance on Friday.

Readings of economic data suggest growing convergence with previous year's activity levels on several indicators, said the report prepared by Department of Economic Affairs.

Broad-based resurgent growth in several indicators like manufacturing purchasing managers' (PMI) index, eight core industries, e-way bills, kharif sowing, power consumption, railway freight, cargo traffic and passenger vehicle sales augur well for prospects of growth recovery.

Passenger vehicle sales grew to the highest levels in July since March, inching close to previous year levels. The growth in sales of small cars, two-wheelers and sports utility vehicles offer early signs of revival in rural demand and tentative urban demand.

Rising sales of fertilisers and registrations for commercial and agricultural tractors from March to August also are further indicative of strengthening rural demand.

"As countries unlocked in the quarter starting in July, recovery is underway globally. India too is witnessing a sharp V-shaped recovery," said the report.

India's PMI at 52.2 has moved into the expansionary zone in August for the first time since the lockdown, presenting much-required recovery prospects for the manufacturing sector.

The V-shaped pattern of recovery is also seen in steel consumption and production, cement production, GST revenue collection, daily toll collections on highways, retail financial transactions, capital inflows and exports.

"The world after Covid-19 will be different with structural changes in production, consumption and work patterns. As India emerges from this crisis, it will be critical to re-orient the country's policy matrix towards a calibrated reconstruction of the economy and building resilience for an uncertain future," said the report.

Some areas that may require specific attention include agrarian supply chains, factor markets, infrastructure, ICT, start-ups, financial inclusion, skilling and healthcare. Progress in these areas will sustainably boost economic growth in years to come, it added.

( With inputs from ANI )