Several announcements by the governments if implemented well could lead to some growth in the economy.
Economic activity is showing signs of traction, the report said. The PMI manufacturing index is at its highest since 2008. Stronger car sales, rising production of finished steel and diesel consumption, and higher goods and services tax revenue collections indicate that the economy has bounced back strongly since “the unlock”, backed by pent-up and festive season demand. Nevertheless, sustaining this rebound could be a challenge next year, if infection cases continue to be high. We expect India’s GDP to rebound to double digits in FY2022 after contracting in FY2021, the report added.
“During the crisis, policymakers in India have responded with stimulus measures and accommodative monetary policies as well as have announced several structural reforms and schemes that are expected to benefit the nation in the medium to long term and pave the way to strong growth. Be it the vision of and measures to boost self-reliance, agriculture and labour reforms, education policy amendment, or changes to banking regulations, several of these announcements have been expedited post the pandemic. The policy initiative and reforms are expected to improve infrastructure investment and tap into the potential of capital goods, chemicals, technology, and electronics industries,” said Rumki Majumdar, Economist, Deloitte India.
Rural demand will continue to benefit from the good monsoon in 2020 and the government’s support for rural employment. However, urban demand could be restrained by the continued fear of infections, uncertainties around employment, and consumers increasing precautionary savings. Weak demand could translate into slow investment and the economy might get stuck in a low demand-supply vicious circle, the report added.