Signs of Economic Recovery

Why in news?

The Commerce Ministry has released the latest data on output at the eight core industries.

What are some data?

• Overall production at the infrastructure industries extended their year-on-year decline to a fourth straight month in June 2020.
• Of the seven industries that extended their contractions, only coal shrank at a faster pace (-15.5%) than in May.
• Refinery products shrank 8.9% marking an improvement from the 21.3% contraction seen the previous month.
• [Refinery products - Largest weight on the index contributing 28%]
• The lifting of restrictions on inter and intra-State movement of persons and goods revived vehicular movement and fuel demand.
• With personal modes of mobility preferred given the fear of infection, petroproduct consumption grew.
• Electricity output fell at a slower 11% pace than the May month’s 14.8% slump.
• This signals an uptick in demand from some manufacturing clusters including in western and northern India.

• Among the other sectors, steel production continued to tumble: output shrank by more than a third (-33.8%) from June 2019.
• The cement have put the worst behind as urban construction and projects under the rural job guarantee scheme spurred demand.
• Fertilizers saw the expansion ease to 4.2%, from 7.5% in May.

What does the IMD forecast say?

• With monsoon activity above normal so far this year, kharif sowing was almost 14% higher as on July 31 than at the same time in 2019.
• The IMD is forecasting above average rainfall in August and September.
• So, the outlook for the agriculture-reliant rural economy is far more promising than for most other sectors.

What do these data reveal?

• These data shows that the pandemic-spurred economic contraction may have begun to bottom out.
• The sector-wise performance affirms that the gradual reopening since June have helped tease increase some demand in the economy.

What is the conclusion?

• To be sure, the economy is still a fair distance from a sustained turnaround with other data flagging the risks to a recovery.
• The significant shortfalls in GST collection point to the difficulties the governments are facing in garnering crucially needed revenue.
• This has already swelled the fiscal deficit at the end of the first quarter to 83% of the full year’s target.
• The new infections curve showing no signs of plateauing as yet.
• So, the policymakers have the task of stemming the COVID-19 tide without dampening economic momentum.

Source: The Hindu