April-June quarter sees V-shaped recovery despite second Covid wave: Report

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India witnessed a V-shaped economic recovery during the April-June of quarter of the current fiscal year, despite second wave of Covid-19 infections, according to finance ministry’s latest Monthly Economic Review. While the data testifies that the macroeconomic fundamentals of India are strong, the ministry expressed concern over rising Covid-19 cases in Kerala and Maharashtra and highlighted the necessity for a stronger management in controlling the pandemic in these states.

During the first quarter of the previous fiscal year, the economy had nosedived to record  -24.4% due to the Covid-induced disruptions.

PMI composite index improved

Khariff sowing climbed to 101% of normal levels as on September3, indicating that the agriculture sector continues to offer comfortable prospects. This is despite a monsoon deficiency of 9%, so far in the year, the report said. Increasing tractor sales and record-high paddy procurement have augured well for strengthened rural demand in the coming months, it added.

The Industry is gaining lost ground slowly with the IIP in June witnessing a broad-based growth, having recovered by almost 95% of pre-pandemic levels of June 2019. Also, recently the eight-core industries index rose by 9.4% YoY in July 2021, with almost every sector surpassing the pre-pandemic levels, with the exception of crude oil and refinery products.

It said that India’s PMI Composite index, which includes both services and manufacturing placed comfortably at 55.4, indicating the beginning of economic expansion, it said. Further, the fast-paced recovery is evident in the growth of power consumption, rail freight, highway toll collections, e-way bills, digital transactions, air passenger traffic and robust GST collections.

On the revenue collection side, it said, the central government finances improved during April 2021, to July 2021 over the corresponding period of previous year, with both direct and indirect taxes showing a significant YoY growth.

During April 2021 to July 2021, the central government finances improved due to the higher collections of direct and indirect taxes as compared to the corresponding period of the previous year.

Observing that the robust recovery in tax collections augurs well for the government to provide the required budgeted support to the economy, the report said, the recent decision to repeal the retrospective tax law introduced in 2012, further reflects the commitment of the government towards providing a stable and predictable tax regime for all stakeholders.

It was also observed that the recovery in tax collections have been robust which bodes well for the government to provide the economy the required budgeted support, the report said. The repealing of the retrospective tax law introduced in 2012, further shows the government’s commitment towards providing a stable and predictable tax regime for all stakeholders, it added.

Delta variant still a concern

The continuing fear around the delta variant of Covid-19 has once again increased the necessity to take precautions against it with greater focus on testing, tracking and adopting Covid-19 appropriate behaviour.

Kerala accounted for nearly 60% of daily new cases in the country and also reporting the highest daily deaths across all states, is a cause of concern, it said.

It added that, while experts have warned against a potential third wave in the coming festive months, management and pandemic control needs to be strengthen with Kerala and Maharashtra accounting for 70% of active cases in the country.