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March 12, 2021

India has evolved through the pandemic on the back of strong policy initiatives by the government, along with an optimistic outlook for economic recovery. India has administered ~4 million doses of COVID-19 vaccines in two weeks since January 16, 2021, becoming the fifth-largest inoculated country globally. India has become the world’s vaccine hub and extended support to 90+ countries seeking to stock up vaccines.

Since March 2020, early lockdown, health-infra ramp-up, incremental unlocking, blanket testing, social distancing, tailored fiscal stimulus (to reduce supply-side disruptions and revive demand) and structural reforms initiated by the government have helped restrict the fatality rate in India to 1.2%—one of the lowest in the world. India is emerging as the world's fastest-growing major economy, with the IMF holding its growth forecasts as high as 6.8% for FY23. Also, the Economic Survey 2020-21 has drawn attention to the V-shaped economic growth—a testament to the burgeoning Indian economy and its intrinsic strength.

Sustained economic recovery was recorded in January 2021. Agriculture witnessed strong growth due to a healthy season of Rabi sowing. As of January 29, 2021, the total area sown under Rabi crops stood at 685 lakh hectares, a 2.9% YoY increase. Total area sown under Kharif stood at 1,117 lakh hectares, a 4.8% YoY increase. In December 2020, tractor sales increased by 41.2% YoY. For the 2020-21 Kharif season, total paddy procurement grew 17.75% YoY (as of February 4, 2021). From the ongoing Kharif Marketing Season (KMS) procurement operations, with MSP value worth Rs. 1.14 lakh crore (US$ 15.71 billion), ~89 lakh farmers have already benefitted.

Between April 2020 and January 2021, employment demand under the Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS) improved significantly (51.5% YoY). Until January 2021, 323.2 crore person-days’ work was recorded under the scheme, a 46.8% YoY increase.

In January 2021, the Manufacturing Purchasing Managers' Index (PMI) in India stood at 57.7, compared with 56.4 in December 2020. This was driven by new orders and rising exports. In January 2021, merchandise exports rose 5.4% YoY. PMI Services Index also increased to 52.8 in January 2021, from 52.3 in December 2020. Overall business optimism improved in January 2021 owing to launch of the COVID-19 vaccination programme.

Power consumption increased 4.8% in January 2021 and 5.2% in December 2020, indicating sustained improvements in business and industrial activities.

In January 2021, rail freight traffic reported 8.71% YoY growth, with broad development across varied product categories.

GST revenues stood at Rs. 1.2 lakh crore (US$ 16.54 billion) in January 2021, an 8% YoY growth.

As of February 4, 2021, the Indian basket of crude oil reached US$ 51.00 58.40 a barrel, compared with average crude oil prices of US$ 51.00 a barrel as of December 31, 2020, indicating optimistic oil market sentiments, with rising economic activities and COVID-19 vaccine prospects.

FDI remains a significant engine of economic growth and a key source of India's non-debt financing. Total FDI inflows stood at a record high of US$ 58.37 billion between April 2020 and November 2020, a 22.4% increase over first eight months of 2019-20, supporting India's position as a favoured global investor destination. Net FPI inflows stood at US$ 1.23 billion in January 2021.

RBI kept the liquidity adjustment facility (LAF) policy repo rate unchanged at 4.0% from Feb. 3 to Feb. 5, 2021, because of the Monetary Policy Committee’s (MPC) assessment of the current and evolving macroeconomic situation.

In January 2021, RBI’s dollar purchases in the foreign exchange market kept the rupee largely bound to Rs. 72.82-73.45/US$ 1. As of January 29, 2021, India's foreign exchange reserves stood at US$ 590.18 billion.

As of January 15, 2021, non-food credit growth increased to 6.4%, of which bank credit to the commercial sector increased at 5.9% YoY. As of January 8, 2021, the Emergency Credit Line Guarantee Scheme (ECLGS) recorded funds allocation worth Rs. 1.65 lakh crore (US$ 22.74 billion), which will be disbursed to 42.46 lakh borrowers.

In the Union Budget 2021-22, capital expenditure for FY22 has been targeted to increase at 34.5% over FY21 (BE) and reach Rs. 5.5 lakh crore (US$ 75.81 billion) to boost the economy.

Key highlights of the Union Budget 2021-22 are as follows:

The government announced several measures to boost economic growth under the following six pillars:

  1. Health and Wellbeing
    • Rs. 35,000 crore (US$ 4.80 billion) for COVID-19 vaccine was announced in BE for FY22; Made-in-India Pneumococcal Vaccine was announced across the country; a new centrally sponsored scheme—PM Aatmanirbhar Swasth Bharat Yojana—was launched; announcement of the National Health Mission and Mission Poshan 2.0 and other plans were made including Universal Coverage of Water Supply, Urban Swachh Bharat Mission 2.0 and Vehicle Scrapping Policy.
  2. Physical & Financial Capital and Infrastructure
    • Primary initiatives include the Production-linked Incentive Scheme (PLI) in 13 sectors; the Mega Investment Textiles Parks (MITRA) scheme for seven textile parks in three years; expansion of the National Infrastructure Pipeline (NIP) to 7,400 projects; establishment of institutional infrastructure financing structure; the National Monetization Pipeline; the National Rail Plan for India (2030); and increase in FDI limit in the insurance sector from 49% to 74%.
  3. Inclusive Development for Aspirational India
    • Key steps include ensuring that MSPs are at least 1.5x the cost of production across all commodities; expanding the SWAMITVA scheme to all states/UTs; strengthening funds for agricultural credit and infrastructure; investing in the construction of modern fishing ports and fish landing centres; encouraging adoption of One Nation One Ration Card; and allocating Rs. 15,700 crore (US$ 2.16 billion) to the MSME sector.
  4. Reinvigorating Human Capital
    • Primary initiatives include qualitative reinforcement of 15,000 schools under the National Education Policy; creation of 100 new Sainik Schools; India's Higher Education Commission; Leh Central University; and 750 tribal-area Eklavya model residential schools.
  5. Innovation and R&D
    • An outlay of Rs. 50,000 crore (US$ 6.89 billion) under the National Research Foundation (NRF), financial incentives worth Rs. 1,500 crore (US$ 206.76 million) to encourage digital payment methods, launch of the PSLV-CS51, Gaganyaan mission operations and launch of the Deep Ocean Mission.
  6. Minimum Government and Maximum Governance
    • Key initiatives include the National Commission for Allied Healthcare Professionals Bill in the parliament to ensure transparent and effective regulation of 56 allied healthcare professions; establishment of a contractual dispute resolution mechanism; allocation of funds worth Rs. 3,768 crore (US$ 519.37 million) for the first digital census in India; and Rs. 1,000 crore (US$ 137.84 million) for the welfare of tea workers in Assam and West Bengal.


Under the Aatmanirbhar Bharat (self-reliant India) Mission, structural reforms and policy push, along with a series of steps announced in the Union Budget 2021-22 to achieve broad-based inclusive development, are likely to reinforce the economy and put it back on a strong and sustainable growth path in the coming year. India's real GDP growth for FY22 is projected at 11% by the Economic Survey 2020-21. The January 2021 WEO update forecasts 11.5% growth in FY22 and 6.8% in FY23, closer to the potential growth rate for the economy. According to the IMF, in the next two years, India is also expected to emerge as the fastest-growing economy. In February 2021, the MPC projected GDP growth to be 10.5% in FY22.

Note: Conversion rate used for February 2021 is Rs. 1 = US$ 0.014

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