For the last few years, the Modi government has been in reform mode. From GST to demonetisation, insolvency and Bankruptcy Code to Monetary Policy Committee, corporate tax cuts to rationalisation of Income Tax and so on. Most of these reforms were disruptive and destabilized existing businesses (some, unfortunately, even shut down) but with macroeconomic reforms in place, the economy is set for a golden decade ahead.
The direct tax collection growth is at an all-time high, with 86 per cent growth in the first quarter. GST collection is going north of 1 lakh crore rupees every month, and the company registration is growing exponentially – especially in the manufacturing and agriculture sector. In some sectors like Infomation Technology and Pharmaceutical, hiring frenzy is going on with applications getting 50-80 per cent hike and the consumer sentiment is consistently improving.
Even if there is a third wave of Coronavirus, India is better placed to deal with it as more than half of the eligible population is already vaccinated, and the government has already accumulated the resources for firefighting. When the countries in the Western world and East Asia are struggling with the Delta variant, in India, the pandemic is under control except in states like Kerala and Maharashtra.
Given the positivity around the economic sentiment, banks and non-banking financial services companies are opening up their wallets to provide credit. In the last four to five years, the credit growth in the country was between 1-2 per cent because banks were facing an issue with Non-performing assets, and there was also a lack of demand in the economy. However, now the financial institutions have realized that the country is set for a golden decade ahead, and they are not hesitating in granting loans.
The latest in the strings of Indian economic recovery are ICRA reports showing the improvement in major financial as well as non-financial Indicators of the GDP growth. These pointers include high-frequency service and industrial sector indicators. “With the further easing of the state-wise restrictions, especially across the southern states, the roots of the economic recovery deepened in July 2021. Despite a normalizing base, eight of the 15 high-frequency indicators recorded an encouraging improvement in their year-on-year (YoY) growth in July 2021,” said Aditi Nayar, the chief economist of the ICRA.
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Moreover, a marked improvement was noticed in 10 of the 13 non-financial indicators on a month-on-month level. The volume in more than half of these 13 non-financial indicators rose both to their pre-COVID level as well as pre-April 2021 levels. It is to be noted that another massive lockdown was imposed in April 2021. The seven indicators in which the volume rose to pre-COVID levels are non-oil merchandise exports, GST e-way bills, electricity generation, CIL’s output, petrol consumption, PV output, and rail freight traffic. “As the states started unlocking, the mobility for retail and recreation posted a sharp improvement from around 60 percent below baseline at end-May 2021 to 23 percent below baseline by end-July 2021 (seven-day moving average),” Nayar said.
The FASTag toll collections rose from 15.5 per cent to 2,980 crores in July 2021. Growth in FASTag is significant because it shows an increase in freight traffic on national highways, stipulating the rise in demand as well as supply. The improvement in freight traffic can also be gauzed by the fact that petrol sales of state refineries have reached pre-COVID levels while those of diesel have also shown improvement, though they have not reached their pre-COVID level yet.
The country is all set for double-digit growth in the ongoing decade, just like it witnessed in the 2000s. Once the lockdown restrictions are removed, and the sectors like Tourism and hospitality also open up, the economy would further pick face, and India would become the major driver of the global economy.