INDIA’S ECONOMY REBOUNDS IN FOURTH QUARTER


Warning: Trying to access array offset on value of type bool in /bitnami/wordpress/wp-content/themes/the-newspaper/theme-framework/theme-style/function/template-functions.php on line 673

India’s economy grew 0.4 percent in 2020’s fourth quarter, year on year, according to the National Statistics Office, compared to a 24.4-percent crash in the second quarter and a further 7.3-percent slide in the third.
Farming added 3.9 percent and manufacturing 1.6 percent, figures showed.
Investment grew 2.6 percent during the period, its first increase since December 2019, based in part on prime minister Narendra Modi’s proposed array of tax incentives to revive the nation’s manufacturing sector.
Modi’s government also has announced an aggressive COVID vaccination plan, further boosting expectations for an economic recovery.
The fourth quarter’s gains were shared unequally, with large companies listed on stock exchanges reaping record profits while small businesses languished, Mahesh Vyas, CEO of the Center for Monitoring of the Indian Economy, told The New York Times.
The large companies “are grabbing markets at the expense of small-scale industry,” he said. “Small and medium-size companies are not able to survive.”
Consumer spending, the main engine of India’s economy, shrank 2.4 percent during the quarter, far less than the 11.3-percent plunge in the year’s third quarter. 
However, the service sector generally and financial services, in particular, performed much better than expected, South Asia economist Priyanka Kashore at Oxford Economics, said to the NYT.
Also, restaurants and bars are crowded on weekends, street markets are thronged with shoppers, and theaters and gyms have reopened, although face-to-face service businesses remain far from recovery, the NYT reported.
The Reserve Bank of India cut its repo rate by 1.15 percentage points over the past 12 months but left in unchanged at 4 percent at its most recent meeting, saying in a public statement that the economy is poised to grow again and worrisome rates of inflation are far in the future.
The bank, along with a variety of analysts and economists, projects the Indian economy to expand by more than 10 percent this year.
Rising prices for oil and other commodities pose a potential threat to India’s recovery, as does a resurgence of the virus, which would do particular damage to India’s vast informal economy of rickshaw drivers, day laborers, street vendors, and millions of others, observers warn.
TRENDPOST: Modi’s challenge is not only to return the economy to its 6-percent annual growth rate before it began to lag in 2018 and 2019 but also to create job opportunities for the more than 600 million citizens that are under 25 years old, which accounts for than half India’s population. 
And then there are the ongoing protests, such as the farmers’ revolt that has been raging since November, plus the other insurrections that were shut down when the government imposed strict lockdowns… which will negatively affect economic growth. 
TRENDPOST: Mirroring U.S. equity markets, India’s stock market has detached itself from economic fundamentals and is soaring on the winds of speculation, according to Wall Street Journal analyst Mike Bird in a 22 February report.
As we noted in the U.S. economic section, India’s benchmark Sensex stock index has gained 22 percent this year and is now valued at 24 times the next year’s earnings, a bloat larger than that of the U.S. S&P 500.
In contrast, the country’s economy shrank 10.3 percent last year and, although it grew 3.1 percent in 2020’s fourth quarter, a firm economic recovery is still at least a year away, the IMF has forecast.
Due to last year’s global economic collapse, as much as 25 percent of India’s corporate loans could become delinquent this year, data gathered by India Ratings and Research shows.
As a nation, India owes more than $1 trillion, Commodity.com reports, and its national debt will rise to 80 percent of GNP as it borrows about $185 billion this fiscal year to stimulate its economy and support millions of poor farmers, according to government figures.

Skip to content