Green shoots of economic revival have emerged, will grow further: Finmin report

The government on Monday said green shoots have emerged and will grow further on the back of a conducive policy environment, nudging the coronavirus-hit economy to move on the path of recovery and growth. India's growth has been forecast at (-) 4.5 per cent in 2020, a 6.4 percentage points downward revision compared to the April 2020 forecast as per the World Economic Outlook (June 2020) report of the the International Monetary Fund (IMF).

Given the immense uncertainty associated with infection and macroeconomic recession curves of countries across the world, the IMF has revised downward global growth to (?) 4.9 per cent in 2020, 1.9 percentage points lower than its April 2020 forecast, the Macroeconomic Report for June released by the Economic Affairs Department said.

However, the report said, "early green shoots of economic revival have emerged in May and June with real activity indicators like electricity and fuel consumption, inter and intra-state movement of goods, retail financial transactions witnessing pick up."

Last month, Prime Minister Narendra Modi had said that the economy is showing "green shoots" as the country emerges from the coronavirus lockdown and underscored the importance of being focussed on both life and livelihood.

While addressing chief ministers and Lt Governors of 21 states and union territories, Modi had said danger of the virus is not over yet, and there was need to remain vigilant while opening up the economy.

The report further said that India's forex reserves at USD 505.6 billion as on June 19 continue to provide a crucial cushion to external shocks on the back of higher FDI, portfolio flows and low oil prices.

This recovery is also evident in the Goods & Services Tax (GST) collections for June 2020 that clocked Rs 90,917 crore at gross levels, 46 per cent higher than May and 181 per cent over April, it noted.

?Policy environment was made conducive beginning March 2020 when the RBI and government were able to correctly anticipate the economic downturn following the outbreak of the pandemic, it said.

The stimulus package, which is a set of reforms providing continuity to the initiative that commenced in 2014, the report said, has accelerated the reforms at a time when the pandemic has constrained the fiscal envelope of the government and dampened the inclination of the people to spend, in view of economic uncertainty.

The commitment of the government towards both structural reforms and supportive social welfare measures will help build on these 'green shoots', it said.

Economic growth of pre-COVID times, as and when restored through fuller unlocking of the economy, will heavily lean on the reforms undertaken today to enhance its potential tomorrow,? it said.

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India's economic growth dipped to 4.2 per cent in 2019-20 on account of lower growth in January-March quarter, mainly attributable to the global spread of COVID-19 since January 2020 and subsequent lockdown measures across countries including India, the report said.