Finance Ministry Monthly Review: ‘Growth impulses transmitted to all sectors; inflationary tendencies transitory’

India is well-placed on the path to swift recovery with growth impulses visibly transmitted to all sectors of the economy, and economic activity gaining further momentum in September, the Finance Ministry said in its Monthly Economic Review on Tuesday. The external sector continues to offer bright prospects to growth revival as the country’s merchandise exports crossed the $30-billion mark for the sixth consecutive month in fiscal year 2021-22, it said.

“Sustained robust growth in agriculture, strong rebound in manufacturing and industry, resumption of services activity, buoyant revenue collections and improved fiscal position bear testimony to resilience of the Indian economy,” the ministry said in its September review. In tandem with growth impulses witnessed across the economy, the rate of growth of bank credit stood at 6.7 per cent year-on-year in the fortnight ending September 10, 2021, compared to 5.3 per cent in the corresponding period of the previous year, it added.

Rating agency Moody’s last week changed India’s sovereign rating outlook from ‘negative’ to ‘stable’ while affirming the foreign-currency and local-currency long-term issuer ratings at Baa3. After a deep contraction of 7.3 per cent in the fiscal ending March 2021, India’s real GDP is expected to surpass 2019 levels this financial year, rebounding to a growth rate of 9.3 per cent, followed by 7.9 per cent in fiscal 2022, it said. Looking ahead, Moody’s expects real GDP growth to average around 6 per cent over the medium term, its report had said.

The Ministry’s review said performance of high frequency indicators — like rail freight activity, power consumption, e-way bills, GST collections, highway toll collections — in August and September further indicate a broad-based recovery.

Continued decline in growth of currency in circulation since August is indicative of decreasing demand for precautionary savings with progressive reopening of the economy, it said.

With merchandise trade deficit rising in September, it indicates that consumption and investment demand is also picking up in India, it said. The external debt-to-GDP ratio remains comfortable, declining to 20.2 per cent at the end-June 2021, from 21.1 per cent at the end-March 2021.

With restoration of supply chains, improved mobility, and softening food inflation, CPI inflation retreated to a four month-low of 5.3 per cent in August 2021, clearly demonstrating that inflationary tendencies are pandemic-induced and transitory. However, it said, volatile prices in the international crude oil markets and upward-bound prices of edible oils and metal products may continue to pose concerns.

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