Kumar further said that as per consensus estimates, despite downward revision in the GDP growth projections, India is expected to be amongst the fastest-growing major economies in the world.
“A strong rebound is expected on the back of rapid vaccinations, a recovering monsoon boosting agricultural output, thrust on infrastructure investments by the government, growth in exports, which have performed remarkably during April–June registering a growth of 18 per cent over the same period in the pre-pandemic year of 2019-20.
“We also expect consumption to recover in the third and fourth quarters of the fiscal year,” he said in a newsletter ‘arthNITI’.
The Reserve Bank has lowered the country’s growth projection for the current financial year to 9.5 per cent from 10.5 per cent estimated earlier, while the World Bank has projected India’s economy to grow at 8.3 per cent in 2021.
According to Kumar, after phased unlocking post the second Covid wave, the economic activity has gained strength.
“The government has also stepped into provide another dose of stimulus of Rs 6.3 lakh crore, focused on healthcare, tourism, agriculture, infrastructure, MSMEs and exports.
“As growth momentum gathers pace, supported by the measures undertaken by the government, the Indian economy will emerge stronger on a sustainable development path,” he noted.
The Niti Aayog Vice Chairman pointed out that compared to steady expansion in the first five months of 2021, the global Purchasing Managers’ Index (PMI) recorded slower growth in June and July.
“In Asia, the manufacturing PMI witnessed deceleration in China. In India, manufacturing PMI rose to a three-month high of 55.3 in July, reflecting likely expansion of manufacturing activity in the coming months,” he said, adding that.India’s services PMI improved to 45.4 but remained in the contraction zone.
Kumar observed that subsequent to a fairly robust recovery in the March quarter, the Indian economy was impacted by a much stronger Covid second wave, leading to imposition of strict curbs across states and decline in economic activity.
“High-frequency indicators, such as PMI, cement and steel production, power demand, auto sales, etc., show that recovery was negatively impacted in the June quarter,” he said.
In May 2021, the Consumer Price Index (CPI) inflation rose to 6.3 per cent and breached RBI’s threshold of 4(+/-2)% for the first time in six months, whereas the Wholesale Price Index (WPI) inflation spiked to an 11-year high of 12.9%.
CPI inflation declined to 5.6 per cent and WPI came down to 11.2 per cent in July.
“Current high inflation is largely due to supply-side factors rather than demand-side issues and hence can be expected to be transitory,” Kumar said..
Referring to the global economy, Kumar said according to the World Bank, the global economy is on a path of robust recovery, with a projected growth of 5.6 per cent in 2021—the strongest post-recession pace in 80 years.
The real GDP of advanced economies is projected to expand by 5.4 per cent whereas emerging markets and developing economies are expected to grow by 6.0 per cent.
However, the pace of recovery is diverging across countries, reflecting variations in pandemic-induced disruptions and the extent of policy support.