Agri rebound pushing swift recovery, crude price a concern: FinMin

The finance ministry has said that the economy is "well placed on the path of swift recovery" on the back of rebound in agriculture, industry and services. The monthly economic report for September released by the Department of Economic Affairs, however, warns that volatility in crude oil prices and high edible oil and metal prices may continue to remain as concerns.

“India is well-placed on the path to swift recovery with growth impulses visibly transmitted to all sectors of the economy. Sustained and robust growth in agriculture, sharp rebound in manufacturing and industry, resumption of services activity and buoyant revenues are suggesting that economy is progressing well,” says the report. It attributes this to strategic reforms as well as new milestones in the drive to vaccinate people against Covid-19.

The agriculture sector continues to strengthen rural demand on the back of estimated increase in kharif production, record procurement of wheat and paddy in rabi marketing season and ongoing kharif marketing season, the reports says, adding that a satisfactory monsoon promises similar benefits in future as well.

“Industry is gaining lost ground, with the Index of Industrial Production witnessing a broad-based YoY growth of 11.5% in July 2021, led by growth in capital goods and consumer durables. Acceleration in YoY growth of eight core industries’ index in August at 11.5% to reach 104% of its corresponding pre-pandemic level portends further strengthening of industrial growth in the coming months. In synergy, rise in PMI Manufacturing to 53.7 on the back of improved consumer demand and business confidence, coupled with PMI Services clocking a 55.2, establish a robust recovery,” says the report.

The report says restoration of supply chains and subsequent softening of food and retail inflation demonstrates that the inflationary tendencies have been induced by the pandemic and are transitory. It, however, cautions on the crude oil and metals front. “With restoration of supply chains, improved mobility and softening food inflation, consumer price index inflation retreated to a four month-low of 5.3% in August 2021, clearly demonstrating that the inflationary tendencies are pandemic-induced and transitory. However, volatile prices in international crude oil markets and upward-bound prices of edible oils and metal products may continue to pose concerns,” it adds.

Equity markets remain buoyant on reassuring indications of global and domestic economic recovery, it says. “FPI flows into the country remain robust with India reporting the highest inflow of $3 billion in September among emerging market economies. Thus far, in this fiscal, India is reported to have received FPI worth $7.2 billion, the second highest after Brazil’s $9 billion,” says the finance ministry report.