The Reserve Bank of India and the Centre have indicated that the Indian economy is recovering better than expected, as only 18 out of 48 high-frequency indicators tracked by RBI remained below pre-COVID-19 levels while the rest jumped above the February mark.
But both Reserve Bank of India (RBI) and the government have also warned about the possible downside risks and discontinuity in the economic growth due to potential COVID-19 second wave.
"The downside risk, however, remains the spread of the second wave of COVID-19. However, there is growing cautious optimism that the steep plunges of April-June quarter of 2020 may not resurface with significant progress in vaccines and contact-intensive sectors increasingly adapting to a virtual normal," the finance ministry said in its monthly economic assessment last week, reported The Times of India.
The Central Bank's economic trackers showed that- 3-wheeler sales, domestic air cargo, domestic tractor sales, domestic air passenger traffic and MF investment in equity have fallen well below the pre-COVID-19 levels.
The tracker also indicated that- passenger vehicles, 2-wheeler sales, insurance premium, port cargo, oil consumption, steel production, cement production and international air cargo- are showing some signs of recovery.
The parameters were closely monitored in October, and there were only two indicators including, monthly equity investments by mutual funds and the monthly outstanding for certificates of deposits – which were worse compared to February levels when India started to see early effects of the deadly coronavirus.
Certificate of deposits (CD) is the short term money market instruments issued by banks and financial institutions.
The figures released by RBI along with the monetary policy statement on Friday revealed that mutual funds investments in equities in November have slipped further.
Those in the amber category- which indicates that the worst may be over but is not on the recovery path et- include domestic passenger traffic, given the capacity restriction on airlines imposed by the government, and corporate bond issuance, which has slipped.
Although air cargo is doing a bit better, it has not moved towards normalization. It is improving every month on a sequential basis, as the demand for goods in the domestic market has picked up.
Tractor sales are increasing with the government and analysts attributing it to buoyant rural income. But the RBI's estimates suggested that production has moved well beyond the pre-COVID-19 levels but sales- on a seasonally adjusted basis- are below February levels and have slipped during September and October. Unlike tractors, three-wheeler production too remains below pre-COVID-19 levels but is rising.
Overall, the government and RBI said that the economy is recovering better than expected while improving projections for the current financial year.