Over the last decade, the Indian economy was amongst the fastest growing in the world. However, the onset of COVID-19 pushed the country into a pandemic-induced recession, with all the high frequency indicators such as Purchasing Manager’s Index (PMI), Index of Industrial Production (IIP), trade etc. witnessing a plunge. With easing of the lockdown, and the government’s financial stimulus package infusing a new lease of life, India gradually garnered the strength to bounce back. In addition, key sectors including steel, automotive, financial services, energy, etc. have started witnessing growth and achieving pre-COVID-19 levels.
To further stimulate growth, the government is taking active measures such as the PLI scheme, vaccination plan, fiscal consolidation, increasing infrastructure investments, amongst others. The slew of initiatives is expected to steer India back on the growth trajectory, with major financial institutions expecting a high single-digit to double-digit GDP growth in FY22. Similarly, major sectors are also expected to witness a ‘V’ shaped recovery, except the high contact services which may lag given the weak public confidence and persisting restrictions by the government, and awaits increase in discretionary spending along with the success of mass vaccination.
However, the success of this economic and business growth depends heavily on India's dealing with the second wave of the COVID-19 pandemic. Localised lockdowns, as opposed to a national lockdown, and rapid progress on vaccinating the population at scale will help in mitigating its impact on economic growth.
With this backdrop, we at KPMG in India have published the first 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 has started showing signs of recovery, with services (except high contact services sectors such as transportation, hotels etc.) and manufacturing sector witnessing growth due to improved demand
Most of the high-performance indicators have witnessed an upward trend to attain the pre-COVID-19 level, owing to easing of COVID-19 restrictions and improved market conditions