News/ Context : India’s economy is all set for a sharp rise in demand and job creation backed by strong prospects of a investment revival, bank credit surge along with inflation pressure easing , as per the Finance Ministry in its latest report.
In the monthly review of the economy for the month of October the ministry claims that with the necessary tools of micro and macro growth drivers, the Indian economy stage is set for a kickstart of India’s investment cycle and to accelerate its recovery towards becoming the fastest growing economy of the world.
The review released by Department of Economic Affairs projected that with the crossing new milestones in rapid succession regarding covid-19 vaccination campaign along with teeming festivities lending has generated new hope to India’s ongoing economic recovery in terms of fuller restoration of supply chains, demand stimulation, greater employment generation and narrowing of demand-supply mismatches.
As per the Ministry the bank loan had been buoyant in September with a very good credit disbursement in the labour intensive sectors which creates relatively more number of jobs. Thus the Ministry is basically forecasting a strong possibility of fast credit growth in the near future.
In addition to this the report has noted that high growth in loans for consumer durables tracks an upward consumer’s spending in the festival season.
As per the Finance Ministry, ripple effects of escalating global Crude/Petroleum prices and hardening input costs pose concerns on the inflation front, but such concerns aren’t yet witnessed in ‘self-fulfilling inflationary expectations’ as seen in RBI’s inflation survey.
It has emphasised that the recent cut in excise duty by centre on diesel and petrol prices is predicted to cool down inflationary pressures exerted by rising petroleum prices.
The Ministry expects food inflation, which had hit a 30-month low in September, to get lower further in October and get retail inflation less than 4.4% recorded for the previous month.
“Going forward, good kharif production and adequate buffer stock of food grains are expected to get food inflation low,” it asserted.
The review has noted that the ease of inflation pressures as reflected in the retail inflation staying comfortably close to the range of monetary policy goal of RBI, Which could be said as bode well for prioritising the economic growth.
RBI, unlike many other central banks in advanced countries, is Not having pressure to increase the Repo rates for controlling inflation, which no doubts creates more room for monetary side expansion of the demand.
Among what it called as ‘clear indicators of meaningful recovery in India’s real sector’, the Ministry cited the rise in capital goods production/ capital formation as a possible reflection of ‘revival in investment’ and highlighted the rising power demand accompanied with a surge in GST e-way bills generation in October.
The rising trend in revenue collection of GST is predicted to stay strong and continuous post festive season driven by upward movement in economic activity and reinforced tax administration, the review has suggested citing the collections of ₹1.3 lakh crore in October for transactions completed in September, which is the second highest.
The month of October witnessed a splendid growth in e-way bills with revived economic activity amplified by the festive season’, as per the Ministry. With 39% over the pre-pandemic level of October 2019 and 8.2% over the September 2021, as many as 7.35 crore e-way bills were generated within the month of October. This reflects a sustained growth in activity levels after the second wave as per the Ministry asserted.
In comparison to what 0.8% in September and 15.6% above pre-COVID levels of 2019 the power consumption in October 2021 picked up to grow at 3.1 % year on year basis.
It indicates the resilience in power sector, withstanding disruptions in coal supply at electricity generation plants (where supply disruptions are caused by heavy rains in mining areas) and rise of international coal price. The power sector recovery in view of rising power consumption and demand is expected to gain further momentum, as per the report.
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