Worst of crisis over for India’s Covid-ravaged economy – business industry
Indian business and industry leaders are seeing signs of recovery after the coronavirus crisis wiped out nearly a quarter of the country’s economy in the last quarter.
“The more I converse with CEOs of various organisations, the more I get convinced that there is an improvement in the macro-economic situation, especially over the last month or so,” Axis Bank’s chief executive and managing director, Amitabh Chaudhry, told the Economic Times.
While the banker believes the recovery is imminent, he says the process could be slow or “L-shaped,” which is usually accompanied by persistent unemployment and stagnant economic growth. Chaudhry also noted that optimism has returned to the business community, and that this is also evident from looking at his bank’s own loan enquiries, credit card spends and account openings.
Some Indian entrepreneurs earlier pointed to a gradual recovery of the economy after the deep plunge caused by the coronavirus outbreak. As the automotive sector recorded growth in August, India’s Hero Motocorp, one of the largest two-wheeler manufacturers in the world, said that it is facing “the fortunate situation of having more demand than supply,” with growth partly driven by rural and semi-urban markets.
Some other firms noted that the development of the rural economy was helping the overall recovery. According to Tata Steel CEO TV Narendran, the company reduced its dependency on exports and has fully resumed operations. It also saw a revival in demand in the second quarter, thanks to a good monsoon season and the rural economy.
“We are definitely seeing green shoots across all consumer products from FMCG [fast moving consumer goods] to automobiles,” said Venu Srinivasan, chairman of TVS Motor Company, the Economic Times reports.
In a good sign of possible recovery, India’s factory activity expanded to its highest level in over eight years. The IHS Markit Purchasing Managers’ Index (PMI) for manufacturing rose to 56.8 in September from 52 in August. A reading above 50 indicates expansion, while below that signals contraction. Business activity has also improved, but remained in contraction territory, IHS Markit data shows. India’s PMI for services rose from 41.8 in August to 49.8 in September.
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“The economy seems to be improving. Leading indicators from corporates, the RBI [Reserve Bank of India] and the government seem to be pointing to that and as more data comes in the picture will become clearer,” State Bank of India chairman Rajnish Kumar said. Analysts also bet on the festive season, when major Indian celebrations and ceremonies take place, saying it can boost shopping and bring stronger loan growth.
Earlier this year, one of the strictest lockdowns in the world sent most of the key sectors of India’s economy into freefall. The nation’s gross domestic product (GDP) plunged by a record 23.9 percent from April to June.
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