‘Green shoots of economic revival seen across sectors’: Finance ministry

The finance ministry said positive signs were visible across sectors like agricultural procurement, fertiliser sales, energy consumption, freight movement, digital transactions and forex earnings.

The finance ministry on Tuesday said the agricultural sector would be the foundation of the country’s economic growth and “early green shoots” of economic revival are visible with pickup in agricultural procurement, fertiliser sales, energy consumption, freight movement, digital transactions and forex earnings.

Even though most sectors show an upswing in activities, agriculture remains the foundation of this economic growth. (AP file photo)

“Agricultural sector remains the foundation of the Indian economy and with a forecast of a normal monsoon, it should support the rebooting of the Indian economy,” it said in a statement.

Procurement of wheat from farmers by government agencies has been a record 382 lakh metric tonnes (LMT) as on June 16, which surpassed the earlier record of 381.48 LMT in 2012-13.

“This has been accomplished during the trying times of Covid-19 pandemic under the social distancing restrictions. Forty two lakh farmers have been benefited and a total amount of ₹73,500 crore has been paid to them towards minimum support price (MSP) for wheat,” it added.

Similarly, procurement of minor forest produces (MFP) in 16 states has hit a record ₹79.42 crore. Besides, farmers have sown 13.13 million hectares of Kharif crops till June 19, which is 39% higher than the corresponding period last year, with a big jump in area covered under oil seeds, coarse cereals, pulses and cotton, it said.

Fertiliser sales, another indicator of farm sector growth, have also surged by almost 98% year-on-year in May 2020 to 40.02 lakh tonnes, reflecting a robust agricultural sector, it said.

“Though the GDP [gross domestic product] contribution of the sector may not be very large (compared to industry and services), its growth has a very positive impact on the large population dependent on agriculture,” the finance ministry said.

According to the latest official data, India’s GDP grew 4.2% in 2019-20, the slowest in 11 years on the back of falling investment and consumption. In the financial year, agriculture and allied activities recorded a 4.0% growth compared 2.4% in the previous fiscal year. The industrial sector, however, posted a muted growth of 0.9% in FY20 from 4.9% in FY19, and the services sector also slowed to 5.5% in 2019-20 compared to 7.7% in the last financial year.

DK Srivastava, chief policy advisor at consultancy firm EY India, said early economic indicators raise possibilities that extremely pessimistic GDP growth forecasts in FY21 for the country “may be belied”.

“While growth in manufacturing and services is likely to be negative in 1QFY21, the Indian economy may turn into positive growth territory 2QFY21 onwards. This is reflected by important leading indicators such as electricity and petroleum consumption. These early trends indicate that there is a good chance that the GDP growth may turn out to be positive although at a low level in FY21 if the pick-up is strong particularly in the third and fourth quarters of the fiscal year,” Srivastava added.

The economic recovery, he added, would depend on several factors like low interest rate regime, ample liquidity, robust FDI inflows, and continuing low international prices of primary articles particularly crude oil..

The finance ministry said while the nationwide lockdown, first imposed on March 25, “gave a respite to ramp up the health and testing infrastructure in the country” it, however, affected the economy adversely. “With a gradual shift in strategy towards saving lives as well as livelihoods - ‘Jaan bhi Jahan bhi’ - India has entered the ‘Unlock India” phase from June 1 with phased resumption of services and businesses,” it said.

The government and the Reserve bank of india (RBI) have taken prompt policy measures - both short term and long term - in a calibrated manner to reinvigorate the economy at the earliest with minimal damage, it added.

It said that signs of economic recovery are visible as electricity consumption saw lower contraction of 12.5% in June (up to June 21) compared to 15.2% contraction in May and 24% in April. “In June, electricity consumption has continuously improved from (-)19.8 per cent in the first week to (-)11.2 per cent in the second week to (-) 6.2 per cent in the third week of June,” it added.

Anupam Manur, assistant professor at Takshashila Institution, said, “Relaxing some of strictest lockdowns restrictions in the world was bound to result in a slight uptick in economic activity. To attribute this increase entirely to government policy measures and interventions is perhaps being lenient with the truth.”

While launching the auction of coal mines on June 18, Prime Minister Narendra Modi had said that the Indian economy was recovering fast and cited improvements in toll collection, energy consumption and freight traffic improvements.

According to the finance ministry, there is a 130% jump in e-Way bills in May 2020 ( ₹8.98 lakh crore) compared to April 2020 ( ₹3.9 lakh crore) although the number has not reached to the pre-lockdown levels. Value of e-Way bills generated between June 1 and June 19 is Rs. 7.7 lakh crore, it added.

Consumption of petroleum products, a major indicator reflecting consumption and manufacturing activity in the country, increased by 47% from 99,37,000 metric tonnes in April to 1,46,46,000 metric tonnes in May, the statement from the ministry added.

“In June, growth in consumption of petroleum products is expected to be still higher after one month of Unlock 1.0,” it said.

Citing other signs of recovery, the finance ministry said, railway freight traffic saw a 26% improvement in May (8.26 crore tonnes) compared to 6.54 crore tonnes in April. “The improvement is likely to continue in June in sync with growth in movement of goods on National Highways,” said the ministry.

“Average daily electronic toll collections increased from Rs. 8.25 crore in April, 2020 to Rs. 36.84 crore in May, rising more than four times. In the first three weeks of June, it has improved further to Rs. 49.8 crore,” it said.

The retail financial transactions through digital mode via the National Payments Corporation of India (NPCI) platforms, the ministry informed, have also increased sharply from ₹6.71 lakh crore in April to ₹9.65 lakh crore in May and the trend is expected to continue in June driven by a sustained pick-up in real activity.

With the RBI’s efforts towards ensuring adequate liquidity, private placement of corporate bonds have picked up sharply by 94.1% (year-on-year growth) in May at ₹0.84 lakh crore, compared to a contraction of 22% in April ₹0.54 lakh crore, it said. “June is likely to see a still larger placement as excess liquidity persists in the system,” it added.

Average assets under management (AUM) of mutual funds increased by 3.2% to Rs.24.2 lakh crore in May 2020 from ₹23.5 lakh crore in April 2020, it said.

The finance ministry said the country’s forex reserve was $507.6 billion as on June 12, which would provide a “crucial cushion” to external shocks on the back of higher foreign direct investment (FDI), portfolio flows and low oil prices. “FDI in India recorded an inflow of $73.45 billion in FY 2019-20, an increase of 18.5% over the previous fiscal,” it said.