In an effort to emerge from troubled times, the Indian economy is showing decisive signs of a 'V-shaped' recovery in 2021 with the return of consumer confidence, robust financial markets, an uptick in manufacturing and exporters braving it out in the global market with never-say-die spirit, ASSOCHAM has said.
There would be immense accruals of economic benefits of the COVID-19 vaccination programme, about to be rolled out. "The high-frequency data is a strong pointer to a V-shaped recovery in 2021 with the seeds bursting into green shoots over the last two months of 2020 itself," ASSOCHAM Secretary General Deepak Sood said. These green shoots should grow into full-grown plants in the fourth quarter of FY'21 (January-March).
With India about to roll out its vaccination programme with approvals of the two vaccines, the accruals of the economic benefits would be significant, especially to sectors such as hospitality, transportation, entertainment, which were hit hard during the pandemic. "National confidence level has certainly improved even as the first vaccine is yet to be administered," Sood said.
The most definitive of the data is the record collection of Rs 1.15 lakh crore in the Goods and Services Tax (GST) during December. "The state-wise collection showed the fightback spirit in consumer confidence. Illustratively, the largest consumption state of Maharashtra, which was amongst the severely affected by the COVID-19 pandemic, has posted a healthy growth of seven per cent in GST collection; even as the total GST mop-up was up 12 per cent year-on-year," Sood said.
He said the Budget for 2021-22 would be a major catalyst. "Great focus on healthcare, agriculture and revival of demand would be imperatives in Finance Minister Mrs Nirmala Sitharaman's Budget". The entire healthcare value chain from hospitals to medical education, primary health centres, scientific laboratories and further to the pharmaceutical industry along with the logistics is most likely to receive a booster shot of support from the forthcoming Budget.
Generally, December, being the last month of the year reports lower vehicle sales because the buyer tends to prefer the next year as the year of purchase. But December 2020 reported handsome sales in passenger cars with major manufacturers reporting between 15 and 25 per cent growth in sales. Even the commercial vehicles, especially in the LCVs, are showing definite signs of improvement. The IHS Markit India Manufacturing Purchasing Managers' Index (PMI) inched further up at 56.4 in December, from 56.3 in November 2020, staying above the important mark of 50 for the fifth straight month in a row.
"Manufacturers are responding well to consumer demand even as fresh investments seem away. We expect, if the positive trend continues for a few quarters and the government's Production Linked Incentive Scheme starts to show success models, new investment would kick in sooner than later".
Even though some of the major global markets of Europe and the US are battling the second wave of coronavirus, Indian exports have shown remarkable resilience to recover the ground lost in the initial months of the pandemic outbreak.
While the December trade data showed a marginal fall of 0.80 per cent YoY, there are several key sectors posting healthy and handsome growth. Expectedly, the drugs and pharmaceutical exports were up 17.44 per cent. Sectors like iron ore, ceramic products and glassware were amongst the major gainers. "The Indian agriculture shows great potential in the global market, as evident from a smart growth in agri exports like Agrials, oil meals, spices and processed food."
The Indian financial markets, especially the stock market, is in great shape attracting record inflows of the foreign portfolio investment. Over Rs 60,000 crore of net foreign portfolio investment was received in December itself. A great rub-off in the primary market is also seen with most of the Initial Public Offerings receiving overwhelming investor response and impressive listings. Banks have withstood the COVID-19 and the resultant lockdown pressure rather well, with active support from the Reserve Bank of India and the Finance Ministry. Their balance sheets should only improve in the coming quarters.
