Indian Economy Set to Recover Faster than Expected - Oxford Economics

The pandemic has led to a huge economic setbacks for many nations and India is no exception. From supply chain disruptions to reduced consumer activity, from the plunge in trade to the near-collapse of certain industries, the world is going through one of the most difficult times in collective memory. But things are now getting better and Oxford Economics, a global forecasting firm is also stating the same. According to Oxford Economics, the Indian economy is recovering faster than expected and the Reserve Bank of India (RBI) may soon come to an end of the rate easing cycle. The firm also said that inflation is expected to average significantly above 6 percent in the fourth quarter of the current fiscal and the RBI may hold policy rates in December monetary policy review meeting. The consumer inflation rose back to pre-virus highs in October, with almost every broad category other than fuel experiencing a rise in prices. While Q4 is likely to mark the peak for inflation, the trajectory over 2021 remains unstable.

The recovery for Asia’s third-largest economy will also be spurred by the new round of stimulus amounting to Rs. 2.65 trillion announced by Finance Minister Nirmala Sitharaman last week. Costlier vegetables and eggs pushed up retail inflation to a nearly six-and-a-half year high of 7.61 percent in October, keeping it significantly

While Q4 is likely to mark the peak for inflation, the trajectory over 2021 remains unstable

above the comfort zone of the Reserve Bank. Retail inflation stood at 7.27 percent in September 2020. "At the same time, robust bottom-up activity data suggest that the economy may be recovering faster than we anticipated. As such, we see an increasing possibility that the RBI's easing cycle has ended," Oxford Economics said.

Moody’s Investors Service has also revised upwards its GDP forecast for India to - 8.9 percent contraction in the 2020 calendar year, as the economy reflates after a long and strict nationwide lockdown but added the recovery is patchy. Finance Minister Nirmala Sitharaman also argued that India’s economy is seeing a strong recovery taking root as she announced a series of new measures to provide a further boost to Covid-hit economy. As per the new round of stimulus measures, Rs. 1.2 trillion ($16.1 billion) will be pumped into the economy in addition to the Rs. 1.45 trillion announced last Wednesday. That takes the total stimulus announced so far including that from the central bank to Rs. 29.87 trillion, or 15 percent of GDP.

The finance minister said increased energy consumption, a rise in the purchasing managers’ index, improved bank credit and a stock market surge all suggested stimulus measures taken so far had begun to help the economy bounce back. Economists said the fresh set of measures will help bolster growth.