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India\u2019s growth in the first quarter of current financial year is likely to be \u201cthe worst\u201d amongst the four quarters of FY-21 because of economic disruptions caused by the Covid-19 pandemic, an EY India\u2019s report said indicating improved economic performance from the second quarter.<\/p>\n
\u201cHigh frequency indicators for India are giving positive signals after the first two months of the pandemic,\u201d the consultancy firm said in its latest edition of Economy Watch before the scheduled release of official gross domestic product (GDP) data on Monday.<\/p>\n
The optimism of the report is based on indicators such as the Purchasing Managers\u2019 Index (PMI), the Index of Industrial Production (IIP), sales of passenger vehicles, power consumption and the rise in the foreign exchange reserve. <\/p>\n
\u201cIn June and July 2020, PMI manufacturing was close to the benchmark level of 50 at 47.2 and 46.0 respectively. Although IIP has continued to contract in June 2020, its rate of contraction has come down to -16.6% from its May 2020 level of -33.9%. In June 2020, passenger vehicle sales picked up sharply with sales of 1,20,188 units as compared to sales of 33,546 units in April and May 2020 considered together,\u201d it said.<\/p>\n
Although power consumption shows a continued contraction, the rate of contraction has been coming down over successive months since April 2020 when it was at -25%. This fell to -0.4% in the first 20 days of August 2020, it added. It also pointed at the foreign exchange reserves continued to rise steadily reaching a level of $538 billion by August 7, 2020 as a positive indicator.<\/p>\n
DK Srivastava, chief policy advisor of EY India, however, said one adverse development is the slowing down of bank credit growth to 5.8% in the fortnight ending 17 July 2020. \u201cDue to subdued demand, average credit growth fell to 6.4% in the first quarter of FY21 as compared to 7.1% in fourth quarter of FY20,\u201d he said.<\/p>\n
Also\u2009Read: World Bank pauses Ease of Doing Business rankings<\/a><\/p>\n He said the center\u2019s capital expenditure grew by 40.1% in the first quarter of FY-21 as compared to a contraction of -27.6% in the corresponding period previous year, indicating frontloading of capital expenditure by the Union government, which is \u201cwelcomed as it signals investment in infrastructure\u201d in line with the National Infrastructure Pipeline (NIP) objectives.<\/p>\n In his Independence Day address on August 15, Prime Minister Narendra Modi unveiled over Rs 110 lakh crore infrastructure projects to boost the economy and create jobs. \u201cIn order to rapidly modernise India, there is a need to give a new direction to overall infrastructure development,\u201d he said, adding that over 7,000 projects under NIP have been already identified.<\/p>\n