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Economy started showing sign of recovery from Covid with GDP growth rebounding to 20.1% in Q1 and 8.4% in Q2 of current FY.
Dec 30, 2021

I. Introduction

The year 2020 witnessed turmoil due to COVID-19 pandemic which emerged as the biggest threat to economic growth. Indian economy has witnessed a sharp contraction of 24.4 per cent in Q1 and 7.3 per cent in Q2 of FY 2020-21.

To convert COVID pandemic related challenges into opportunity, a series of measures have been taken by the Government to improve the economic situation including inter-alia announcement of the Atmanirbhar package amounting to Rs.29.87 Lakh Crore. Targeted interventions were made to support the economy and livelihood. Moreover, the pace of structural reforms was expedited.

The major reforms undertaken under Atmanirbhar package include Credit guarantee for MSME loans, sectoral structural reforms, policy on strategic disinvestment of CPSEs, reforms in public procurement, setting up of Empowered Group of Secretaries and Project Development Cells for facilitating investment, reduction in compliance burden and single window system for clearances.

These measures, in addition to structural reforms taken up, have assisted the economy in its early revival. India, which was not producing N-95, PPE Kits, ventilators, etc. prior to Corona pandemic has started producing the same and even catering to world markets and became self-reliant. Government has started vaccination drive in January, 2021 and indigenously developed Covaxin vaccine in its fight against Covid pandemic. As on date more than 143 crore Covid doses have already been administered in India. This has not only saved the lives of people but also set momentum for early recovery of the economy.

Economy has started showing sign of recovery with GDP growth rebounding to 20.1 per cent in Q1 and 8.4 percent in Q2 of 2021-22. Several high frequency indicators like E-way bills, rail freight, port traffic, GST collections and power consumption have demonstrated a V-shaped recovery in the economy.

II. Industrial Performance

Industrial sector performance during 2020-21 declined considerably, by -8.4%, mainly due to nationwide closure of industries by the Government to limit the impact caused by Covid-19 pandemic on public health from March 2020 onwards. The Mining & Manufacturing sectors were majorly impacted as they declined by -7.8% & -9.6% respectively, whereas Electricity generation sector declined by -0.5%.

The cumulative Index of Industrial Production for April-October, 2020 declined by 17.3 percent. However, various measures undertaken by the Government including vaccination & the structural reforms and resilience of the Indian industry have helped early revival of the economy, which led to surge in IIP for same period in 2021 by 20.0 per cent. Similarly, the Mining, Manufacturing, and Electricity sector have registered growth of 20.4 percent, 21.2 percent, and 11.4 percent respectively during the same period.

III. Trends in Growth of Eight Core Industries

The Index of Eight Core Industries (ICI) measures the performance of eight core industries i.e. Coal, Crude Oil, Natural Gas, Petroleum Refinery Products, Fertilizers, Steel, Cement and Electricity. The industries included in the ICI comprise 40.27 per cent weight in the Index of Industrial Production (IIP).

During 2020-21, the ICI growth rate was -6.4 per cent compared to average growth rate of 3.0 per cent during last 3 years i.e. 2017-18 to 2019-20. The rate of growth has been robust during the current financial year (April to October, 2021-22) i.e. 15.1%. Out of Eight Core sectors, six of them have shown double digit growth with Cement and Steel sectors leading the pack with growth rates of 33.6% & 28.6% respectively. Whereas, Crude Oil & Fertilizers sector growth remain muted in the same period i.e. (April to October, 2021-22). These shows the revival of core industries.

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