The Indian economy is gaining momentum, driven by the recovery in industrial output, growth in core sectors, coupled with fairly focused government initiatives and policies. While the economy is reviving on the back of ebbing effects of the second wave and rapid vaccination drive, it is also witnessing a gradual momentum in some of the highly distressed sectors.

Recent high frequency indicators are showing positive signs, raising both business and consumer optimism. Factors such as rail and freight activity, passenger traffic, power consumption, e-way bills and Goods and Services Tax (GST) collections are following a rising trend.

With a revival in demand and improvement in industrial indices, the economy is observing positive sentiment among financial institutions. Both Reserve Bank of India (RBI) and International Monetary Fund (IMF) have projected a 9.5 per cent GDP growth for the country in FY22. Foreign investors are also exuding confidence in the economy, reflected in 23 per cent growth in FDI inflows in 1Q22 vs 4Q20 (a pre-COVID-19 period).

A combination of RBI’s monetary policies and government initiatives such as Production Linked Incentive Scheme (PLI), National Monetisation Plan (NMP), PM Gati Shakti – National Master Plan, amongst others is in force to further augment growth.

In a nutshell, the Indian economy is likely to recuperate, backed by industrial resurgence, demand revival, and policy intervention. However, widening trade deficit, inflationary pressures, and scepticism around third wave of COVID-19 might impede the pace of recovery.

With this backdrop, we at KPMG in India have published the latest edition of “Indian Economy Insights”, an assessment of key trends that are central to India’s recovery in the post-lockdown scenario, long-term growth potential and changes in the current market sentiment.

Indian economy insights

Despite the impact of second wave of COVID-19, India’s GVA grew by 18.8 per cent in the first quarter of FY22 as compared to the previous year, owing to lower base.

The agriculture sector witnessed a growth of 4.5 per cent in GVA in 1Q22, vis à vis 1Q21, as compared to the 3.6 per cent y-o-y growth in FY21. 

India witnessed a 90.3 per cent increase in total FDI inflow during April to June of FY22, compared to the same period during FY21. Further, the country's foreign exchange reserves reached an all time high of USD638.6 billion in September 2021.

Indian economy insights
Indian economy insights