This is what the shape of the economic recovery will look like

There are also positive indicators. A huge 83 percent revenue growth in the first seven months of the current fiscal year has provided the government with a significant buffer to spend and support economic recovery. Capital spending, which acts as a growth multiplier, rose 28% between April and October, a four-year high. “We expect tax revenues to exceed the budget target by around 15 percent,” said a finance ministry official, who wished to remain anonymous.

Second, the strength of exports held back the economic recovery this year. “We plan to reach $ 400-420 billion [in exports] and, in fact, what’s been reassuring is that the order-taking position of Indian exporters is pretty good, ”says Ajay Sahai, Managing Director and CEO of the Federation of All Indian Export Organizations (FIEO ). “That is why we hope that the trend will also continue next year.”

Ajay Sahai, Managing Director and CEO of the Federation of All Indian Export Organizations

RBI’s bimonthly survey of consumer confidence for the period October-November 2021 showed that demand remained on “pessimistic ground”. The current situation index, which is the current perception compared to the period of the previous year, improved to 62.3 in November 2021 from 57.7 in September, after hitting a low of 48, 6 in July. The rise was largely due to increased consumer spending, but pessimism persisted over price levels, employment, the economy and incomes. (A reading below 100 indicates pessimism and above 100 indicates optimism.) The One-Year Expectations Index rose to 109.6 in November from 107 in September, supported by heightened optimism for income among households and the employment scenario.

Threats on the way

First threat: the big O. Says Pant of India Ratings: “Omicron has added to the list of uncertainties. Delhi has already announced measures limiting mobility, resulting in reduced demand. If these kinds of measures are announced by other states and remain in effect longer, it will affect consumption and growth in the fourth quarter of the current fiscal year. “Former chief statistician Sen points out that much economic recovery will depend on the political response to Omicron. “The second wave of Covid-19 has taught us that if you apply lockdowns strategically rather than broadly, it is much less disruptive and not all supply chains are not blocked, ”he said.

Many economists agree that MSMEs lost market share from income to large companies during the pandemic

But there are other caveats as well. Inflationary concerns should keep demand subdued. Wholesale inflation in India peaked at 14.23% in November and is expected to stay in double digits for the next several months due to the depreciating rupee, high international crude oil prices and, well, Omicron. fears a disruption of the global supply chain. . Meanwhile, CPI inflation hit a three-month high of 4.91% in the same month. Households expected inflation to harden in the short to medium term, according to the RBI’s Household Inflation Expectations Survey. The proportion of respondents expecting inflation to rise over the next three months and over the coming year increased in November 2021. Inflation expectations for the next three months increased by 150 basis points and that for the period of the coming year of 170 basis points.

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