The Indian economy may return to a positive growth territory around the second quarter of the current financial year, EY India chief policy advisor D.K. Srivastava said, amid most think tanks predicting a severe contraction this financial year.
“This is reflected by important leading indicators such as electricity and petroleum consumption. These early trends indicate that there is a good chance that the GDP growth may turn out to be positive although at a low level in FY21 if the pick-up is strong particularly in the third and fourth quarters of the fiscal year,” Srivastava said in a statement.
He added that this may be helped by a low interest rate regime, availability of ample liquidity, robust foreign direct investment (FDI) inflows, and continuing low international prices of primary articles particularly crude oil.
“These indicators may help India belie some of the extremely pessimistic recent GDP forecasts showing negative growth rates as high as (-) 7.3 per cent by the OECD in their double hit scenario and (-) 4.0 per cent by the ADB (Asian Development Bank),” Srivastava said.
With monsoons expected to be normal or above normal, India’s agriculture sector is set to perform better than other years and push rural economy. While the surplus labor force could put pressure on the rural economy, normal or above normal monsoons that is expected this year along with the amendment of the six-decade old Essential Commodities Act which now allows farmers to get better prices for their produce, could be a huge shot in the arm.
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India resorted to a strict 21-day stringent nationwide lockdown on 25 March to contain the spread of Covid-19. A government statement said that the lockdown period gave a respite to ramp up the health and testing infrastructure in the country. “Due to timely tracing, treatment and reporting, the number of people recovering from the virus is continuously rising and the active cases, as on date, are 41 per cent of the total cases in the country,” the official statement said.
A higher income in the rural areas would also give some push to consumption.
Meanwhile the World Bank said that the global economy will slip into a deep recession and shrink by 5.2 per cent in 2020, due to the deadly impact of the coronavirus pandemic. Millions of people will be pushed into poverty the report said. This could be the worst year for global economy since the World War II, it said..