The Signal: The Week Highlights

1. India’s GDP Goes Grand

Indian economy returned to growth in Q3FY21 with GDP & GVA reporting 0.4% and 1.0% after 2 consecutive quarters of contraction. 6%+ growth in Construction, Financials, Real Estate and Services were key drivers for growth, marking return to pre-pandemic health and strengthening of V-shaped recovery.

GVA growth metrics for FY21 has been revised upwards to (-) 6.5% from (-) 7.2% earlier, courtesy of revival of Transport & Travel segment. Further, govt.’s flagship ‘Atmanirbhar’ policy and broadening PLI scheme will be instrumental in printing GDP growth for the near and short-term, with long-lasting effects on long-term growth.

2. Manufacturing Makes Promising Potential

India Manufacturing PMI recorded 57.5 in February vs 57.7 in January. In October, it recorded the highest figures in 12 years at 58.9. Remaining flat-to-positive, the index remained above its long-run average of 53.6. The PMI reading has maintained growth trajectory for 7 th month in a row. 

As is seen globally, manufacturing PMI continues to out-perform its services counterpart, courtesy of the latter being hit harder by Covid-19. 3-month joint-highest business optimism can translate into healthier economic conditions in times to come. Vaccination drives to play instrumental role in the same.

3. Services Serves Growth On The Menu

India Services PMI increased to 55.3 in February from 52.8 in January, growing at its fastest pace in over a year. Growing for 5 months in a row, survey credited the uptick to improved demand and more favorable market conditions. Sub-sector data highlighted Transport & Storage as the brightest spots recording the strongest increases in new business and output. Information & Communication was the only sub-sector to post contractions in sales and business activity.

he growing services PMI adds to expectations of strengthening of current economic recovery, with other high-frequency indicators such as IIP, auto sales, railway freight, power demand, and exports(declining at weakest rate in last 12 months) also exhibiting similar traits.

4. Drained India Drawn As Investment Destination For To-Be Gain(ed) Investors

Economic Multilateralism and National Capacity Building will help nations recover from covid disruptions. Export and Demography prowess coupled with like-minded policies and practices can make India the hotspot for investments the world-over, thus kick-starting a global recovery from home.

Coming out of this trouble bubble has boosted India’s efforts to become the supreme everything-maker as much as it has set back its abilities to do so. In expedition of New Normal, the country is quick to adapting and improvising on current challenges to make them future opportunities for growth.

5. Subsidy Suite Puts A Spring On Safety

Subsidy bill is likely to be higher for 2021-22 compared to budget estimate (BE) 2020-21, but possibly lower than RE 2020-21. Higher spending on food and fertilizer sees minimal comfort by reduced in low oil prices. Cash transfers also saw robust response from beneficiaries, as can be inferred from data on Aadhaar-enabled Payment System, where the value and volume of transactions have risen steadily this year.

The higher outlay on subsidy must also be seen in the backdrop of the Covid-19 pandemic and lockdown, with the Centre announcing relief measures under the Pradhan Mantri Garib Kalyan Yojana. Real shock is likely to come from low revenue receipts.