Threat To An Uneasy Recovery

India's economic rebound is for real, albeit slow and shaky, but it is up against a minefield of challenges in the quest for growth

- Rajat Mishra

ON AUGUST 1, while addressing the Rajya Sabha on inflation, Finance Minister Nirmala Sitharaman declared that despite adversities, India remains the world’s fastest-growing major economy. The applause in Parliament that followed does ring true, but what is also true is that the country’s $3.1-trillion economy and 1.3-billion population were sucker-punched by the consecutive waves of Covid-19. The extent of the damage finds mention in RBI’s report titled Scars of the Pandemic. Here’s a peek. The output losses for individual years have been worked out to ₹19.1 lakh crore, ₹17.1 lakh crore and ₹16.4 lakh crore for FY21, FY22 and FY23, respectively. Taking the actual GDP growth rate of (-) 6.6 per cent for FY21, 8.9 per cent for FY22, and assuming growth rate of 7.2 per cent for FY23 and 7.5 per cent beyond that, the report mentions that India is expected to overcome Covid-19 losses only by FY35.

Sounds frighteningly long? Yes, but the good news is that some early signs of economic recovery are clearly visible. In July, GST collections were at ₹1.49 lakh crore, the second-highest ever; credit offtake was at a robust 14.5 per cent; and manufacturing sector activity was at its highest in the past eight months. In the April-June quarter of FY23, GDP grew 13.5 per cent. Despite being lower than the RBI’s projection of 16.2 per cent and also lower than the 20.1 per cent of Q1FY22, a 13.5 per cent growth rate is not to be scoffed at. Plus, there are signs of sequential recovery, especially in contact-intensive services. And with inflation moderating, one is cautiously optimistic.