There is visible evidence that the recovery of Indian economy is becoming wider in the third quarter of 2022 as per recent report by rating agency Investment Information and Credit Rating Agency of India (ICRA). ICRA states that it expects the GDP to increase 6-6.5 percent in the third quarter of 2022 (Q3 of FY22) but the economy is yet to reach the stability sought by Monetary Policy Committee (MPC).
“…Encouragingly, the PV output and ports cargo traffic recorded a turnaround, printing above their pre-Covid volumes in Q3 FY2022, suggesting a modest broad-basing of the recovery of Indian economy. However, margin compression may have constrained the value-added growth, based on which ICRA expects the real GDP to expand by 6-6.5% YoY in Q3 FY2022 (+8.4% in Q2 FY2022),” said Chief Economist Aditi Nayar in the report.
ICRA also said that the year-on-year performance of 10 out of 15 indicators showed better growth in Dec, 2022 compared to Nov. 2022. These include GST e-way bills, non-oil merchandise exports, power generation, two-wheeler output, and scheduled commercial banks’ aggregate deposits and non-food credit.
“The daily average creation of GST e-way bills fell to 2.1 million from 2.3 million in December 2021 during January 1-16, 2022. Following a y-o-y increase in December 2021, state refiners’ sales of gasoline and diesel contracted in the first half of January 2022. Even so, from December 2021 to January 1-16, 2022, y-o-y growth in electricity demand slowed to 1.9 percent, down from 2.8 percent in December 2021. The Consumer Price Index (CPI) accelerated to a six-month high of 5.59 per cent in December 2021, close to the RBI’s upper tolerance band of six per cent.” Said Ms. Nayar
She also added that there was a rise in economic activities in December as many sectors tried to reach their performance in October.
As per the report, in December 2021, ASTag toll collections and retail payments reached all-time highs, while monthly mobility for retail and recreation surpassed the baseline period for the first time since beginning of the pandemic.
“Encouragingly, the quarterly data suggests a modest broad-basing of the recovery in Q3 FY2022, relative to Q2 FY2022, when compared to respective pre-Covid volumes,” Ms. Nayar said.
ICRA stated that with the new uncertainty due to omicron variant of the coronavirus and the restrictions imposed, it expects a status quo of the monetary policy and reverse repo rate in upcoming RBI policy meet.
“The onset of the third wave of COVID-19 has triggered State-wise restrictions, which have expectedly interrupted the momentum in the ongoing month, reiterating that the recovery is yet to attain durability,” said Ms. Nayar in a report as published in The Hindu.
According to another report published on the Pioneer, World Bank sees a rise in global extreme poverty, and a large number of people are subsisting on 1.90 USD per day, below the Bank’s standard of 2 USD per day.
“Though policy steps helped mitigate the pandemic, it is still likely to result in greater poverty and inequality. And the path of recovery will follow the path of the virus. Despite large increases in India’s central budget the state budgets are presenting problems with contraction of revenues and rising deficits. It contracted by 16 percent in 2020-21. It has been falling since 2018-19 by 13.1 percent. In the face of dwindling revenue receipts, RBI observes, states took recourse to expenditure compression. A concern is that developing economies will need to be careful as they would have to withdraw post-pandemic fiscal support and look to increase the efficiency of public spending,” the report said.