India's worst economic phase over: Centre

August 04, 2020 15:03

With gradual unlocking of COVID-19 restrictions, the worst on the economic front seems to be over as high-frequency indicators show improvement, according to the latest monthly report released by the Ministry of Finance on Tuesday.

The indicators include index of industrial production, purchasing managers index, power generation, production of steel and cement, railway freight, traffic at major ports, air cargo and passenger traffic, e-way bill generation capturing the inter-state movement of goods, consumption of petroleum products and motor vehicle registrations among others.

However, risks on account of rising COVID-19 cases and intermittent state lockdowns remain, warns the 37-page report by the Department of Economic Affairs.Inflation eased in June relative to the previous two months, indicating weak demand pressures and food supply chain recoveries. Volatility in most of the essential commodity prices stabilised reflecting their uninterrupted availability.Lower inflation, nonetheless, is supportive of lower interest rates and benchmark bond yields that further softened in June.

The report said growth in money supply is commensurate with potential demand for credit in the commercial sector, although part of the growth has been driven by a surge in net foreign exchange assets.The government has been deploying surplus liquidity available with banks to finance critical support to the economy damaged by the pandemic.

Although this has challenged the fiscal position, the government has been rationalising expenditure to ease the fiscal burden. Goods and Services Tax collections also provided some respite with year-on-year contraction falling from 38.2 per cent in May to 14 per cent in July.

"On the external front, India continues to attract robust foreign direct investments. Foreign portfolio investment inflows also rebounded to a 15-month high in June, reflecting the unshaken belief of foreign investors in India's macroeconomic fundamentals," said the report.

As a result, the Indian rupee recovered to 75.53 per US dollar by June-end as compared to the previous month-end.Since the onset of the pandemic in India, stronger recovery of exports ensured that India registered a trade surplus of 0.8 billion dollars in June despite rising crude and gold prices.

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