As economic activities have slowed down amid the second wave of COVID-19 and lock-downs across states, a finance ministry report has said that faster vaccine coverage and front-loading of fiscal measures announced in this year's Budget would be the major factors in boosting the investment and consumption cycles and, in turn, reviving the economy.
The Monthly Economic Review for May, released by the department of economic affairs (DEA) on Wednesday, noted that in the fourth quarter of FY20-21 growth in capex generated positive spillovers for consumption, including in the contact-sensitive sectors, these steps would facilitate recovery, after the second wave.
Further, a healthy monsoon forecasts bodes well for continued momentum in agricultural growth, it said.
With state-level lock-down restrictions being more adaptive to learnings from the first wave, manufacturing and construction are expected to experience a softer economic shock in the current quarter, it said.
"As we cautiously recuperate from the second wave, rapid vaccination and frontloading of the fiscal measures planned in the Union Budget hold key to invigorating the investment, and thereby consumption, cycle in the coming quarters," it said.
It added that quickening the pace and coverage of vaccination is critical to help India heal and regain the momentum of economic recovery.
The DEA noted that provisional GDP estimates available for January-March quarter (Q4) of FY20-21 confirm a V-shaped recovery in India's economic prospects in the second half of the year, after an unprecedented COVID-19-induced contraction.
India's real GDP is estimated to grow at 0.5% in Q3 and 1.6% in Q4 of FY20-21 leading to an upward revision in annual real GDP growth from (-)8.0% (2nd advance estimates) to (-)7.3% in FY 20-21.
Gross value added (GVA) at basic prices for FY20-21 is estimated to grow at (-)6.2% with agriculture & allied activities lending its unwavering support for economic recovery throughout the year.
Given the large contribution of subsidies in Q3 and Q4, estimated GVA growth of 1.6% in Q3 and 3.7% in Q4 is more representative of economic performance in the second half of FY20-21.
The ministry in its report also noted that India is one of the select few economies that have witnessed positive year-on-year growth in the last two consecutive quarters.
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