The improvements are expected to continue, with some analysts seeing the country returning to growth as soon as this quarter. The recovery from the lockdown has been stronger than expected, Reserve Bank of India Governor Shaktikanta Das said Thursday, signaling ahead of next week’s rate decision that policy makers will keep their supportive stance.
“While the farm sector remained the bright spot, supported by a good monsoon season and subsidized inputs, we think the recovery likely spread wider across the economy and is on the verge of becoming entrenched,” Rahul Bajoria, the Mumbai-based chief India economist at Barclays Plc, wrote in a report to clients.
That improvement coincides with a drop in India’s daily virus cases, which have tapered off to half of its peak of more than 97,000 infections a day in mid-September.
“With cases rising elsewhere, India has fallen off the top in terms of fastest growing cases as well as deaths,” said Bajoria, who sees positive growth this quarter and a full-year contraction at 6.4% -- milder than the RBI’s forecast for a 9.5% decline.
The RBI has been doing the heavy lifting on providing stimulus to the economy, having cut interest rates by 115 basis points so far this year, infused liquidity and transferred billions of rupees in dividend to the government. But its support has been stymied by inflation that’s surged well above the central bank’s 2%-6% target band.
For its part, the government expanded fiscal stimulus to 15% of the economy, with most measures related to credit guarantee programs.
What Bloomberg Economics Says...
“We expect the recovery to moderate as inadequate fiscal stimulus, delayed monetary easing and fresh headwinds to exports counter strength in the rural economy and a boost from further lockdown relaxation.”
-- Abhishek Gupta, India economist
There is continuous improvement, according to State Bank of India economist Soumya Kanti Ghosh. The third quarter numbers could be even better, in line with the trends seen in economies globally, he said.
--With assistance from Tomoko Sato.
© 2020 Bloomberg L.P.
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