Delhi based think tank, National Council for Applied Economic Research (NCAER) has released a report which says that most sectors of India are on track to reach pre-pandemic levels very soon.
The agriculture sector, which was largely unaffected by COVID, has continued to grow at its long-term average and the manufacturing sector is also on track to recuperate the majority of the losses it sustained during the pandemic, according to the report.
The National Council for Applied Economic Research said in its monthly economic review- “The economic news has been favourable on balance, on account of better than projected fiscal outcomes, a rebound in most high-frequency indicators, and another impetus to policy reform, including a hitherto inconceivable privatisation of Air India.”
With an increase in vaccinations and a decrease in the COVID infections, economic activity has continued to normalise, according to the report.
“With the economy predicted to grow at 9.5 % (RBI) this year, most sectors seem to be on track to achieve pre-pandemic levels and then grow beyond them,” the report said. However, the service industry which was the hardest hit by the pandemic since it is the most contact-intensive, and it is the slowest to recover, according to the report.
The report further emphasised on four key points for domestic policy formulation, these are:
- Putting fiscal policy on a more sustainable path,
- Keeping an eye on the impact of the COVID-related economic stress on the asset quality of banks and non-banking financial institutions (NBFIs),
- Better understanding and knowledge to alleviate the constraints to private investment, and
- Taking advantage of the current optimism in the global trade outlook.
“Even as the domestic economic situation has stabilised, the global economic environment appears to be facing unique headwinds,” it stated.
The report also highlights the rising inflation on account of the generous fiscal stimulus in some of the advanced economies such as the United States , supply chain bottlenecks, and rising energy prices; an impending tightening of monetary policy in advanced economies; and the seemingly irrational exuberance in the capital markets.
According to the October issue of the NCAER’s review of the economy, navigating these headwinds will be critical in the coming months.
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