Indian economy showing revival signs, inflation to ease soon: Ministry

13 Jul '21

3 min read

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The Indian economy is showing indications of revival from the second wave of the pandemic, according to the department of economic affairs (DEA) under the finance ministry. A healthy monsoon coverage, gradually rising kharif sowing and unlocking of states are expected to ease inflation, DEA said in its monthly economic report for June released recently.

Substantiating its claim on the ‘signs of revival’, the DEA report points out to goods and services tax (GST) e-way bill volumes, power consumption and vehicle registrations.

"India is on the move again with total volume of e-way bills rising by 37.1 per cent in June 2021 over May 2021 and 26 per cent YoY [year on year]. This augurs well for GST collections in subsequent months," said the report.

This implies that monthly GST revenue that fell below the ₹1 lakh crore mark in June after eight months of buoyant revenues may remain above the psychological level in the next month. The report also said that power consumption growth improved to 4.5 per cent sequentially in June 2021 over May and 8.4 per cent YoY, even though it remained slightly below pre-COVID 2019 levels.

Inflationary pressures took an upturn in May 2021 with headline inflation (CPI-C) and wholesale price index (WPI) inflation touching a high of 6.3 per cent and 12.94 per cent respectively, it said.

"Supply side disruptions in states and unfavourable base effects drove the broad-based momentum in retail inflation across food, fuel and core categories," the report said.

"Healthy monsoon coverage, gradually rising Kharif sowing and unlocking of states is expected to ease food, and thereby headline inflation. However, risks due to global demand-led recovery in commodity prices and input cost pressures remain," it added.

DEA also pointed out that while supply side disruptions stoked retail inflation, healthy monsoon, unlock and kharif sowing are expected to bring reprieve even as global demand led recovery risks continue.

The broad-based economic relief package, extended to mitigate the second wave, amounted to ₹6.29 lakh crore. The Reserve Bank of India continues with its efforts to calm the nerves of the market and revive sectors with both backward and forward linkages and multiplier effects on growth, the report said.

"Rail freight continues to sustain its momentum with freight loading higher by 11 per cent in June 2021 compared to June 2019 and 20 percent higher compared to June 2020. While localised lockdowns and mobility restrictions dented automobile sales in May 2021, June data on vehicle registrations depict revitalisation of demand as states unlock," the report added.

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