The Ministry of Finance noted in its latest monthly report that the GDP growth estimates for Q2: 2020-21 reflect a faster recovery of the Indian economy subsequent to unlocking and supportive policy. The sustained increase in major economic activity indicators beyond September, raises hopes of a better performance in Q3 in alignment with the global scenario.
The year-on-year GDP contraction of 7.5% in Q2 of 2020-21 underlies a quarter-on-quarter surge in GDP growth of 23%. This V-shaped recovery, evident at the half-way stage of 2020- 21, reflects the resilience and robustness of the Indian economy. The fundamentals of the economy remain strong as gradual scaling back of lockdowns, along with the astute support of Atmanirbhar Bharat Mission has placed the economy firmly on the path of recovery.
This is in alignment with economic recovery across the globe reflecting a world-wide pick-up in business and consumer confidence. Growth in fixed investment along with a gradual increase in private consumption and sizeable contribution from net exports has led the recovery of the Indian economy in Q2. The growth drivers have obtained largest support from agriculture followed by construction and manufacturing.
The contact-sensitive services sector has also contributed although mainly through logistics and communication. Services dependent on human mobility and contact will bide their time to reach prepandemic levels before the fear of contagion declines to manageable levels, addressed among others, by the emergence of a vaccine.
The recently celebrated festive season contributed to a rise in fresh COVID-19 positive cases in India, although numbers have started to decline again, a trend seen in many other countries. Consequently, world-wide, the months of October and November, 2020 have been of economic uncertainty with global composite PMI and goods trade activity showing a tepid increase.
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