India on its Way to Becoming Fastest Growing Economy in World: FinMin Report

Fast vaccination and teeming festivities will drive India’s ongoing recovery following in narrowing of demand-supply gaps and greater employment prospects, as per the monthly Economic Review prepared by the finance ministry.

“Aatmanirbhar Bharat Mission summarising major structural reforms remains to play a vital role in shaping India’s economic recovery, both via signifying of business opportunities and enlargement of spending channels.”

“Equipped with necessary macro and micro growth drivers, the stage is set for India’s investment cycle to jumpstart and catalyse its recovery towards becoming the fastest growing economy in the world,” the review report stated.

According to the Economic Survey 2020-21, India is projected with a GDP growth of 11% during the current financial year ending March 2022.

The Survey had said growth will be reinforced by supply-side drive from modifications and easing of regulations, boost for infrastructural investments, improvement to manufacturing sector through Production-Linked Incentive (PLI) schemes, recovery of stifled demand, rise in flexible consumption subsequent to rollout of vaccines and pick-up in credit given passable liquidity and low interest rates.

As per Confederation of All India Traders, India’s economic recovery gathered steam in the festive season, logging a decade high Diwali sales of Rs 1.3 lakh crore (US$ 17.5 billion). Bettering COVID-19 situation amid high business and consumer spirits provided sustained economic recovery in October 2021 as well. The global economic recovery still remains to be affected by prolonged supply constraints and input cost inflation, it stated. However, IMF in its October 2021 update anticipates enhanced global growth prospects at 5.8% in 2021 and 4.9% in 2022 causing a coterminous global trade growth, by volume, at 9.7% and 6.7%, respectively. World Trade Organization’s October estimate also endorses favourable trade prospects bolstered by resurgence in global economic activity and vaccine dissemination. This forecasts well for India’s export performance in the near future lending credibility to IMF projecting India becoming the fastest growing economy, among major countries, in the current and the following year.

Agricultural sector maintains its strong existence in economic recovery with higher acreage of Rabi sowing, enhanced reservoir levels, and sufficient availability of fertilisers and seeds guaranteed by the government, it stated. Prolonged rise in agri-exports, growing year-on-year by 22% in April-August 2021, suggests government’s commitment to increasing farmers’ income, it stated, adding up, rural demand remains buoyant with month-on-month improvement in tractor and two and three-wheeler sales in September 2021.

The report stated, softening retail inflation and sufficient cash flow in the market are also reflected in largely stable G-Sec and corporate bond yields since July 2021. “A more intentional effort to decrease cost of borrowing is noticed in complete pass-through of policy repo cuts as weighted average lending rate (WALR) on fresh rupee loans decrease by 130 basis points between February 2020 and September 2021,” it stated. Plausibly, it said, RBI’s Monetary Policy Committee in its 33^rd meeting during October 6-8 decided to remain with the present configuration on the policy rates and its accommodative attitude, while deciding to focus on growth.