The finance ministry on Tuesday said the impending vaccination drive in various countries, coupled with sustained improvement in high frequency indicators, helped the economy perform better in H2FY21.
This comes days ahead of the advance estimates for gross domestic product (GDP) growth for FY21.
In its monthly economic review for December, the Department of Economic Affairs (DEA) said: “Approval for the long-awaited vaccine and initiation of vaccination drives in various countries has enhanced optimism on both the health and economic fronts, despite the continuing surge in global cases and potential challenge of a mutant strain.”
It added that the effective management of Covid despite the festive season and onset of winter — combined with the sustained improvement in high frequency indicators and a V-shaped recovery thanks to the easing of lockdown restrictions — distinguish the Indian economy as one riding against the Covid wave.
According to the DEA, India has been successful in bending the Covid curve, with falling infections, a rising recovery rate (now at 95 per cent), and one of the lowest fatality rates.
The active caseload has fallen below 250,000, with India now at 10th in the number of active cases.
The report added that the government was prepared to undertake a mega-vaccination drive, with a blueprint ready.
However, it cautioned that while the impending vaccination was drawing closer, continued observation of “Covid-appropriate” behaviour was still crucial, in light of the incoming mutant strain and possible precaution fatigue.
As regards individual sectors, the report said that agricultural remains the bright spot — thanks to a healthy 2.9 per cent year-on-year growth in rabi sowing, accelerating tractor sales, and storage in reservoirs reaching 122 per cent of the decadal average.
Along with the rise in MSP (accompanied by record procurement) and accelerated wage employment generation through MGNREGS, this bodes well for rural income.
This rise in rural income is reflecting in the healthy — though moderated — sales recorded by passenger vehicles, two- and three-wheelers, tractors, and a rebound in vehicle registrations for the first time since March 2020, the report noted.
At the same time, growth in industrial production ran parallel to the festive fervor of October, and rose to an eight-month high led by manufacturing and electricity sector. Core industries, though, registered a slight decline in November, driven by natural gas and cement, while coal production, electricity, and fertiliser production registered growth.
Steel output showed sequential growth, with consumption recording high year-on-year growth, indicating acceleration in construction.
The sustained spurt in commercial and industrial activity was corroborated by continued growth in PMI manufacturing, power demand, persistent improvement in generation of e-way bills, and highway toll collection rising above pre-Covid levels.
Growth momentum in rail freight traffic remains strong, thanks to the recovery in earnings. Port cargo traffic has shown YoY growth, with domestic aviation picking up pace.