The Finance Ministry noted in a latest monthly update that with India unlocking, the worst seems to be over for the economy as high-frequency indicators show an improvement from the unprecedented trough the economy had hit in April 2020. These include Index of Industrial Production (IIP), Purchasing Managers Index (PMI), power generation, production of steel and cement, railway freight, traffic at major ports, air cargo and passenger traffic, e-way bill generation capturing inter-state movement of goods, consumption of petroleum products and motor vehicle registration among others. However, risks on account of rising COVID-19 cases and intermittent state lockdowns remain.
With the forecast of a normal monsoon at 102% of long-period average (LPA), agriculture, which contributes about 15% of total gross value added, is set to cushion the shock of COVID pandemic on the Indian economy in 2020-21. Timely and proactive exemptions from COVID-induced lockdowns to the sector facilitated uninterrupted harvesting of rabi crops and enhanced sowing of kharif crops. A record procurement of wheat has enabled a flow of around Rs. 75,000 crore to the farmers which will boost private consumption in rural areas. Since September, 2019, the terms of trade has moved in favour of agriculture and has reinforced rural demand. This has manifested in an increase in rural core inflation between March and June 2020. As a result, the push for growth in coming months appears to be pitched in rural India. The recent landmark reforms announced in agricultural sector could not have been better timed. The reforms that have deregulated and liberalized the agricultural sector, further, empower the farmers to become a bigger and more stable participant in India's growth journey, says the Finance Ministry.
On the external front, India continued to attract robust foreign direct investment (FDI). Foreign Portfolio Investment (FPI) inflows also rebounded to a 15-month high in June, 2020. This reflected the unshaken belief of foreign investors in India's macroeconomic fundamentals. Since the onset of the pandemic in India, stronger recovery of exports ensured that India registered a trade surplus of USD 0.8 billion in June 2020 despite rise in crude and gold prices. This follows a current account surplus in January-March quarter of 2020, for the first time in more than a decade. On the back of buoyant FDI, resurgence of FPI flows and current account surplus, foreign exchange reserves crossed half a trillion mark in June 2020. This safeguards a year of India's imports. Finally, India's persistently low external debt continues to add resilience to the external sector, a necessary safeguard in times of COVID-19, noted the ministry.
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