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October 13, 2021

The Indian economy registered a V-shaped recovery as indicated by the provisional gross domestic product (GDP) estimates. As per the estimates, in the first quarter of FY22, India’s output registered a 20.1% YoY growth, recovering >90% of the pre-pandemic output in the first quarter of FY20. India’s real GVA also registered an 18.8% YoY growth in the first quarter of FY22, posting a recovery of >92% of its corresponding pre-pandemic level (in the first quarter of FY20). Also, in FY21, India registered a current account surplus at 0.9% of the GDP. The economic recovery is driven by the government’s sustained efforts to accelerate vaccination coverage among citizens. This also provided a positive outlook to further revive industrial activities. As of September 8, 2021, vaccination coverage stood at >60% of the adult population.

The Indian government’s policy push to accelerate growth via infrastructure spending and capex has improved capital formation in the economy and therefore, boosted the investment to GDP ratio to ~32% in the fourth quarter of FY21.

In August 2021, the following key frequency indicators highlighted improved performances:

  • As per the ‘Fourth Advance Estimate’ of principal crops, food grain production in India is estimated at 308.65 million tonnes in FY21, an increase of 11.14 million tonnes as compared with FY20.
  • In the ongoing Kharif Marketing Season (KMS), the procurement operations with MSP value of Rs. 164,951.77 crore (US$ 22.40 billion) have benefitted ~129.03 lakh farmers.
  • In August 2021, monthly sales of fertilisers stood at 69.4 LMT, closely equivalent to previous year levels.
  • In August 2021, the Manufacturing Purchasing Managers' Index (PMI) in India stood at 52.3.
  • PMI services recorded a significant rebound in August 2021 at 56.7, an 18-months high to reach expansionary zone after three months. The substantial recovery over July 2021 is attributed to the rapid coverage of vaccination in India.
  • Power consumption increased by 17.1% YoY in August 2021, indicating resumption of industrial and commercial activities, backed by gradual easing of lockdown restrictions with gradual ebbing of the second wave.
  • In June 2021, the overall IIP (Index of Industrial Production) registered a 13.6% growth, driven by a solid and favourable base effect.
  • In July 2021, eight sectors output index increased by 9.4% YoY, indicating resumption of economic activities.
  • At key ports, port traffic stood at 55.04 million tonnes in July 2021, increasing by 7% YoY.
  • In August 2021, rail freight loading stood at 110.55 MT, registering an increase of 16.9% YoY.
  • In August 2021, the total e-way bills generated stood at 6.6 crore, an increase of 33% YoY. The generated e-way bills were worth Rs. 19.04 lakh crore (US$ 258.53 billion) in August 2021, a growth of 37.4% YoY.
  • In August 2021, UPI transactions were valued at Rs. 6.39 lakh crore (US$ 86.77 billion), as compared with Rs. 6.06 lakh crore (US$ 82.28 billion) in July 2021. In terms of volume, UPI transactions stood at 355.5 crore in August 2021, as compared with 324 crore in July 2021.
  • In August 2021, the Indian basket of crude oil reached US$ 70.2 a barrel, compared with the average crude oil price of US$ 73.5 a barrel in July 2021, due to demand build-up.
  • In August 2021, merchandise exports increased to US$ 33.1 billion (at 45.2% YoY growth), compared with US$ 22.8 billion in August 2020, driven by strong performance from key sectors such as non-petroleum products and non-gems and jewellery products.
  • In July 2021, the net assets under management (AUM) of mutual funds reached Rs. 35.32 lakh crore (US$ 479.59 billion), as compared with Rs. 33.67 lakh crore (US$ 457.18 billion) in June 2021.
  • In August 2021, there was surplus liquidity in the system, with an average daily net absorption under the LAF (liquidity adjustment facility) at Rs. 8.5 lakh crore (US$ 115.42 billion), as against Rs. 6.8 lakh crore (US$ 92.33 billion) in July 2021.
  • As of August 27, 2021, reserve money increased by 15.21% YoY, driven by rise in bankers’ deposits with the RBI.
  • As of August 27, 2021, currency in circulation (CiC) registered an increase of 9.82% YoY.
  • In August 2021, Foreign Portfolio Investment (FPI) inflows in the country stood at US$ 2.5 billion.
  • Rupee strengthened to reach Rs. 73.01/US$ 1, as of August 31, 2021, and registered the highest growth in two-and-a-half months.
  • In the first quarter of FY22, gross foreign direct investment (FDI) inflows in India stood at US$ 22.5 billion, as compared with US$ 11.8 billion in the first quarter of FY21.
  • As of August 27, 2021, foreign exchange reserves in India reached US$ 633.5 billion mark.
  • In the fortnight ending August 13, 2021, the overall non-food credit growth increased to 6.61% YoY, as compared with 5.48% growth in the same period last year.
  • In the fortnight ending August 13, 2021, the overall bank credit growth increased to 6.55% YoY, as compared with 5.52% growth in the same period last year.

Between April 2021 and July 2021, the central government finances registered improved performances. In the review period, the corporation tax recorded 171.5% YoY growth and the personal income tax exhibited 76.7% YoY growth. Between April 2021 and July 2021, custom revenue collection registered 144% YoY growth, and the GST collection to the Centre increased by 60% YoY, primarily due to recovery of economic activities. The net tax revenue stood at Rs. 5.29 lakh crore (US$ 71.83 billion), registering a 2.5X growth as compared with the same period last year. In the first quarter of FY22, the non-tax revenue registered a 468.6% growth over the same period last year, mainly due to the RBI’s surplus transfer of funds worth Rs. 0.99 lakh crore (US$ 13.44 billion) to the government.

A broad-based recovery in key macroeconomic indicators in July 2021 and August 2021 provide optimistic prospects for India’s sustained economic recovery. For the next three quarters of FY22, India Is likely to rebound even faster due to proactive efforts of the Indian government and RBI to boost the economy. Accelerated vaccination coverage across the country and revived industrial activities provide confidence to investors for a sustained economic growth in the country.

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



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