Indicators point to economic recovery, but recouping may be fragile: Report

The sharpest contraction was in the construction sector (-50.3 percent), followed by trade, hotels, transport, storage and communication (-47 percent) and manufacturing (-39.3 percent).

 

New Delhi:

After six months of severe stress triggered by the toughest lockdown so far, some high-frequency indicators point towards economic recovery but there are signs that this revival is fragile, Brickwork Ratings said.

It estimated that the economy is likely to contract by 13.5 percent in the second quarter (July-September), and the contraction in FY21 (April 2020 to March 2021) is likely to be around 9.5 percent unless the government takes immediate initiative to revive the economy.

"After six months of severe stress triggered by the severest lockdown so far, there finally is some good news on the economy. Some high-frequency indicators point towards economic recovery," it said in a report.

The manufacturing PMI has shown a sharp increase from 52 in August to 56.8 in September, the highest in eight years.GST collections at Rs 95,480 crore in September have recovered to increase by 3.8 percent from last year and were higher than August collections by 10 percent. Passenger vehicle sale has increased by 31 percent while railway freight traffic showed a 15 percent rise.

After a gap of six months, merchandise exports registered 5.3 percent growth, driven by outbound shipments of engineering goods, petroleum products, pharmaceuticals and readymade garments. There was an increase in power demand and generation as well.

"However, there are indications that this recovery is fragile. Capital expenditure on new projects declined by 81 percent in the second quarter over the corresponding period last year, showing a continuous declining trend in investments," the rating agency said.

The credit-deposit ratio declined in the three fortnights ending September 11, 2020, and non-gold, non-oil imports continue to decline.

In the first quarter, the GDP contraction was 23.9 percent, and except agriculture and allied sectors, all other sectors suffered negative growth rates.

The sharpest contraction was in the construction sector (-50.3 percent), followed by trade, hotels, transport, storage and communication (-47 percent) and manufacturing (-39.3 percent).


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