India’s economic recovery will be boosted by the rural sector, said Housing Development Finance Corporation (HDFC) chairman Deepak Parekh at the company 43rd annual general meeting (AGM). A macroeconomic recovery in India will be subject to the end of lengthy and complete lockdowns even as some signs of improvement are already visible, he added.
“My view is that one should not be too perturbed with forecasts of negative GDP (gross domestic product) growth rates. Most believe that India’s GDP growth which was slowing down in the pre-Covid era will contract by about 5% this year. But recovery will happen assuming no further lengthy and complete lockdowns in future,” Parekh said.
Parekh is a part of the 11-member expert team tasked with making suggestions to the Maharashtra government’s cabinet sub-committee on economic recovery in the wake of Covid.
“Today, the bright spot for India is the rural economy. A good monsoon, strong agricultural growth and government support through rural employment guarantee schemes is enabling rural consumption to lead India’s overall recovery,” Parekh said. Certain sectors are limping back to normalcy, but the strong probability of cycling in and out of lockdowns does remain, he added.
Signs of the wheels of the economy beginning to turn are evident from the fact that unemployment rates have tapered down from their peaks in May, e-toll collections are higher, as are e-way bills, digital transactions and GST (Goods and Services Tax) collections, which are back to the Rs 90,000-crore levels.
Demand for two-wheelers and tractors has risen, even though passenger and commercial vehicle demand remains subdued. Parekh said that from the utter despair that the world was in towards the end of March and April it has moved to a great deal of stability in the financial markets.
Global fiscal support towards the pandemic now stands at $12 trillion and monetary policy across the globe has eased through lower interest rates, liquidity injections and massive asset purchases.
Even in India, various fiscal and policy measures have ensured that there is adequate liquidity in the system. Interest rates are the lowest in the last 10 years.