Economic Activity Consolidates Further In August: PHDCCI

The Indian government should frontload the National Infra Pipeline expenditure as increased spending on infrastructure will give a multiplier effect to rejuvenate the aggregate demand in the economy

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India’s economic activity further consolidated in August recovering from the severe blow dealt by the second wave of the COVID-19 pandemic, according to a PHDCCI report.

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“The performance of lead economic and business indicators shows that the economic activity has consolidated in August 2021 after registering an uptrend for the three consecutive months since May 2021,” said Sanjay Aggarwal, president, PHD Chamber of Commerce and Industry, in a press statement.

Out of the 10-lead economic and business indicators of quick economic trends (QET), tracked by the industry body PHDCCI, only 4 have shown an uptick in the growth for the month of August 2021 as compared with 9 showing the uptrend in July 2021. E-way bill, forex reserves, exchange rate, and stock market have registered positive sequential growth in August 2021 as compared to July 2021, said Aggarwal.

The stock market has shown a sequential growth of 4.8 per cent from INR 52,694 crore in July 2021 to INR 55,238 crore in August 2021, followed by an increase in the E way bills at 2.7 per cent from 64.2 million in July 2021 to 65.9 million in August 2021, according to the report shared.

The sequential growth of forex reserves increased by 2.1 per from $ 621 billion in July 2021 to $ 634 billion in August 2021. The exchange rate appreciated by 0.5 per cent from an average of 74.51 INR/USD in July 2021 to 74.17 INR/USD in August 2021, the report said.

However, GST collections, railway freight, exports, passenger vehicle sales, unemployment, and manufacturing PMI registered a sequential decline in August 2021 compared with July 2021.

Supply-side issues such as high input prices, shortages of raw material, among others are impacting the production possibilities and reducing the price-cost margins of the businesses. The Government’s calibrated measures targeted for the stressed sectors and accelerated vaccination drive in the country will bring back the pace of economic recovery in the coming months, the PHDCCI president stated.

A significant pickup in the economic activity was observed from October 2020 which peaked in January 2021 and started declining from February 2021. The same started increasing from May 2021, peaked in July 2021 and declined again in August 2021, he mentioned.

“At this juncture, there is a need to further fuel the drivers of household consumption and private investments to enhance the aggregate demand in the economy as it will have an accelerated effect on the expansion of capital investments in the country,” Aggarwal insisted.

The Indian Government should frontload the National Infra Pipeline expenditure as increased spending on infrastructure will give a multiplier effect to rejuvenate the aggregate demand in the economy, he noted.     

More and more direct benefit transfers need to be considered for the urban and rural poor under the various welfare schemes in addition to the free distribution of dry rations till Diwali as already announced by the Hon’ble Prime Minister.

Vaccination of population should be continued at a faster pace, let’s target to vaccinate at least half of the population with both doses by end of October 2021, Aggarwal further said.

10 economic and business indicators of QET include demand and supply indicators along with external and financial sectors indicators, added Aggarwal.