Sitharaman’s comments come at a time when the International Monetary Fund (IMF) has projected India’s GDP to contract 10.3 per cent this fiscal year, revised from its forecast of a 4.5 per cent decline in June.
India’s was the fastest-growing large economy till recently, but has been overtaken by China. For instance, in 2019-20, India’s economy grew 4.2 per cent, while China expanded 6 per cent in 2019.
Against the expected contraction in India’s economy this fiscal year, the IMF
projected China’s economy to grow 1.9 per cent in 2020. However, the IMF
expects India’s growth to overtake China’s next year because it (India) is predicted to expand 8.8 per cent, while the latter is expected to see 8.2 per cent growth.
As evidence of revival, Sitharaman highlighted the foreign direct investment (FDI) inflow between April and August. “During this period, FDI inflows
grew by around 13 per cent compared to a non-Covid 2019. Such an increase never happened in India’s case,” she said. She also highlighted the revival in the purchasing managers’ index (PMI) as a key indicator of the sustainable revival of the economy expected during the third and fourth quarters of the fiscal year.
“We can see a revival, particularly in terms of the PMI. There was a spurt in numbers as it was the highest after 2012. This indicates that the revival is steady and sustainable. This sustainable revival will happen in Q3 and Q4,” she said.
According to reports, the IHS Markit India Manufacturing PMI
increased from 52 in August to 56.8 in September, the highest since January 2012. A PMI reading above 50 indicates expansion and below than 50 denotes contraction. In April, the indicator contracted after having grown for 32 consecutive months.
The finance minister also pinned hopes on the festive season to drive India’s revival. “Indicators show that primary sectors, related sectors of agriculture and rural India, are all doing very well. As a result, the consumption of durable goods, agricultural equipment and vehicles -- all are going up. The festive season has commenced in India. As a result of this, I expect demand to grow and could be sustainable,” she said.
Sitharaman said the primary focus for the country would be infrastructure and public spending on infrastructure. She expressed hope that the 6,000-odd projects under the National Infrastructure Pipeline would be the key drivers.
Other focus areas of the government include agriculture and related activities, such as processing food, exporting agricultural goods, and making sure the connectivity to nearby ports are also there to boost imports. The government is also targeting the energy and fintech sectors as key focus areas in revival.