The Reserve Bank of India (RBI) has said that India’s economic recovery will be supported by the vaccination drive against COVID-19, calling it a V-shaped recovery with V being the vaccine. RBI’s January Bulletin revealed several aspects of the economy including the outlook for 2021.
India’s apex bank expects the economy to contract by 7.5pc by the end of March 2021. Growth will be dictated by consumption, and investment needs a kick-start for growth. Several components that contribute to GDP that were limited due to the pandemic, are on the road to recovery. At times like these, government spending is likely to act as a growth booster, RBI noted.
RBI said that GDP is in striking distance of attaining positive territory with inflation easing closer to the target levels.
Outlook for 2021
Although industrial output remains volatile, contracting by 1.9pc in November after a record expansion in October by 4.2pc, industrial activity is finally turning around, according to the RBI bulletin. Both, new orders and output, continued to grow strongly in the industrial sector. Recent shifts in the macroeconomic landscape have brightened the outlook for 2021.
Steel consumption which is a proximate indicator for construction activity, also registered an expansion for the third consecutive month, recording 5.7pc growth from the previous year. The wholesale price index for manufacture of basic material including inputs into steel making, semi-finished stainless steel, castings, forging of steel, long steel products, flat steel products etc, is up to 110.8 in November from 103.4 in the previous year.
In regards to sales passenger car vehicle sales, most of the original equipment manufacturers (OEMs) clocked double digit growth in December, ending the year on a bright note, as they restocked their exhausted inventories, noted RBI report.
Early data from the Ministry of Road and Transport revealed that over 1.8mn units were registered across India in December 2020, the highest ever since April. A growth of 10.3pc for the first time during the pandemic period. Sales of mini-trucks, pick-up vans and other light commercial vehicles whose demand is relatively low, are showing an uptick as more Indians turn to online shopping which is supporting the need for last-mile delivery logistics, said RBI.