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February 28, 2021

For India, 2021 started on a positive note, as the country recorded a decline in active cases (<2.5 lakh ) and ranked 10th in the number of active COVID-19 cases, suggesting that it is on an upward trajectory to bend the COVID-19 curve. In the last week of December 2020, the daily incidences decreased to an average of <20,000 cases and 270 deaths, from near-lakh peaks to >1,000 deaths a day in mid-September 2020. Also, the cumulative test positivity rate in India is currently at 5.6%, which is below the WHO standard of 8%, indicating that testing in India matches the global average.

Efficient management to control the spread of COVID-19, continuous rise in the high frequency indicators, ‘V-shaped’ recovery and easing of lockdown-imposed restrictions highlighted India as a proactive force against COVID-19 pandemic.

In India, multiple vaccines have successfully achieved the trial stage, of which, two were recently authorised for emergency use. Following this, the government prepared a mega vaccination campaign with an aim to vaccinate 30 crore people, including health employees, frontline workers and vulnerable population aged >50 years, along with individuals aged <50 years with associated comorbidities. The government also launched the ‘COVID Vaccine Intelligence Network (Co-WIN)’ system, which is a digitalised platform that will individually monitor the vaccine beneficiaries in real time and provide real-time information about vaccine stocks and storage temperatures. To ensure last-mile delivery and adequate supplies of syringes and other logistics, India's cold chain infrastructure was revamped. To evaluate the efficiency of the system, a dry run of the vaccination drive—spread across 125 districts covering all states and UTs—was conducted.

Agriculture witnessed strong growth prospects due to healthy production of rabi sowing. As of December 31, 2020, the total rabi acreage stood at 620.71 lakh hectares, increased by 2.9% YoY. The area under rabi pulses and oilseeds increased by 4.7% and 6.2%, respectively. For the season of FY21, the government hiked minimum support prices (MSP) for kharif and rabi crops by at 2.1%-12.7%. For the 2020-21 Kharif season, total rice procurement target was set at 495.37 lakh tonnes, of which 316.51 lakh tonnes of rice was already procured as of December 30, 2020.

In December 2020, employment demand under the Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS) significantly improved (increased 56.8% YoY). Until December 2020, 294.5 crore person-days’ work were recorded under the scheme, a 49.4% increase over the previous year. Further, the government, under the Pradhan Mantri Garib Kalyan Rozgar Yojana scheme, allocated an additional Rs. 10,000 crore (US$ 1.37 billion) to boost job creation in the rural sector and supplement rural incomes.

For the first-time after March 2020, the total vehicle registrations in December 2020 bounced back to indicate positive YoY growth, with number of registrations exceeding the previous year's levels.

In December 2020, Manufacturing Purchasing Managers' Index (PMI) in India stood at 56.4, compared with 56.3 in November 2020. This was driven by proactive measures taken by the industry players to increase production and rebuild their inventories to meet the rising demands of consumers.  

Power consumption increased by 3.5% in November 2020 and by 5.2% in December 2020, indicating sustained improvements in business and industrial activities. e-way bills recorded a YoY growth of 17.5% in December 2020; and the number of inter- and intrastate e-way bills produced in December 2020 also exceeded the previous year's levels. GST revenues at Rs. 1.15 lakh crore (US$ 15.76 billion) reported maximum level in December 2020, since its launch, recording 12% YoY growth.

In December 2020, highway toll counts, and collections exceeded pre-COVID-19 (January 2020 and February 2020 average) peaks, rising in tandem with other growth indicators. Also, compared with the pre-COVID daily averages of Rs. 57.9 crore (US$ 7.93 million) and 34.0 lakh, the average daily electronic toll collection and number of transactions stood at Rs. 74.31 crore (US$ 10.18 million) and 44.65 lakh, respectively.

In December 2020, rail freight traffic reported YoY growth of 8.5%, with a broad-based development across varied product categories. From December 1, 2020 to December 20, 2020, gross revenue from railway passenger bookings stood at Rs. 1,432.32 crore (US$ 196.29 million), which corresponds to 51% of the previous year’s levels.

As of December 31, 2020, the Indian basket of crude oil reached US$ 51.00 a barrel, compared with average crude oil prices of US$ 47.05 a barrel in November 2020, indicating optimistic oil market sentiments, with rising economic activities and COVID-19 vaccine prospects.

The rise of economic activity and shift by users to digital payments led to sanguine growth prospects for retail financial transactions through the NPCI platform. In December 2020, UPI payment transactions achieved an all-time high of Rs. 4.16 lakh crore (US$ 57.01 billion) in value and 223 crore in volume.

In December 2020, merchandise exports stood at US$ 26.9 billion. Non-petroleum exports and non-gems & jewellery exports recorded YoY growth of 5.3% and 5.2%, respectively.

Foreign Direct Investment (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$ 46.82 billion between April 2020 and October 2020, a 11.3% increase over first seven months of 2019-20, supporting India's position as a favoured global investor destination. The Indian stock market showed positive outlook among investors, with FPI inflows hitting a record high of US$ 9.7 billion in November 2020 and US$ 8.6 billion in December 2020.

In December 2020, purchase of RBI dollars in the foreign exchange market kept the rupee largely bound at 73.1-73.9 Rs/US$. As of December 25, 2020, India's foreign exchange reserves stood at US$ 580.8 billion.

As of December 18, 2020, non-food credit growth increased to 9.4%, compared with 5.9% as of November 20, 2020. Bank commercial sector loans rose to Rs. 106.0 lakh crore (US$ 1.45 trillion) as of December 18, 2020, from Rs. 104.7 lakh crore (US$ 1.43 trillion) as of November 20, 2020, a YoY growth of 5.76%. This growth is attributed to the Emergency Credit Line Guarantee Scheme (ECLGS), which continues to help MSMEs with significant credit disbursements.

The Centre increased the borrowing cap for states from 3% to 5% of GSDP for FY21, as part of the ‘Aatmanirbhar Bharat’ package. As of December 30, 2020, 10 states adopted the ‘One Nation One Ration Card’ scheme, seven states completed the stipulated ‘ease of doing business’ reforms and two states introduced local body reforms.

The upcoming vaccines are expected to stimulate momentum in global economic activities. Since June 2020, with the gradual easing of lockdown constraints, India has been witnessing a V-shaped recovery. The continuous improvements in high frequency boost the possibility to achieve better results in the second half of FY21.

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

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