The finance ministry said in a report on August 4 that the worst seems to be over and that the agriculture sector will provide a cushion for the coronavirus-hit economy in FY21 given the prospects of a good monsoon.
India is well on the path of recovery from a trough in April, ably supported by a proactive government and central bank policies, the Macroeconomic Report for July, released by the Economic Affairs Department said.
"With India unlocking, the worst seems to be over for the economy as high-frequency indicators recovered in June 2020 from unprecedented troughs in April; however, risks on account of rising COVID-19 cases and intermittent State lockdowns remain," it said.
It further noted that the rise in COVID-19 cases and subsequent intermittent lockdowns make the recovery prospects fragile and called for constant and dynamic monitoring.
Pinning hopes on the farm sector, the report said, agriculture is set to cushion the shock of the COVID pandemic on the Indian economy in 2020-21.
"With the forecast of a normal monsoon at 102 per cent of long-period average (LPA), agriculture, which contributes about 15 per cent of total gross value added, is set to cushion the shock of COVID pandemic on the Indian economy in 2020-21," it said.
Timely and proactive exemptions from COVID-induced lockdowns to the sector facilitated uninterrupted harvesting of rabi crops and enhanced sowing of kharif crops, it said, adding, a record procurement of wheat has enabled a flow of around Rs 75,000 crore to the farmers which will boost private consumption in rural areas.
"Since September, 2019, the terms of trade has moved in favour of agriculture and has reinforced rural demand. This has manifested in an increase in rural core inflation between March and June 2020. As a result, the push for growth in coming months appears to be pitched in rural India," it said.
Pointing at the recent landmark reforms announced in agricultural sector, it said the deregulated and liberalized the agricultural sector, further, empower the farmers to become a bigger and more stable participant in India's growth journey.
Talking about some parameters showing improvement, the report said, contraction in industrial activity, measured by Index of Industrial Production (IIP) and eight core industries, has eased in May as compared to April. Industrial output increased across all sectors and sub-sectors within IIP in May as against April.
Signs of further recovery were witnessed in June with India's Manufacturing PMI improving from 30.8 in May 2020 to 47.2 in June 2020 with output and new orders contracting at much softer rates than seen in April and May, it said.
Services PMI recovered from 12.6 in May 2020 to 33.7 in June 2020, owing to some stabilization in output levels with around 59 per cent of firms reporting no change in output, 4 per cent reporting growth and 37 per cent reporting reduction since May, it added.
There was also an uptick in infrastructure and construction activities in the unlocking phase, it said, adding, contraction in production of finished domestic steel recovered from 41 per cent in May to 31.1 per cent in June 2020.
(With PTI inputs)