NEW DELHI: After facing the worst contraction ever, Indian economy is trying to recover but indicators suggest that recovery will be fragile.
“After six months of severe stress triggered by the severest lockdown so far, there finally is some good news on the economy. Some high-frequency indicators point towards economic recovery,” a latest report from the Brickwork ratings said. However, it suggested that the recovery is still fragile.
“There are indications that this recovery is fragile. Capital expenditure on new projects declined by 81 per cent in the second quarter over the corresponding period last year, showing a continuous declining trend in investments,” the rating agency said.
Also, the labour intensive sectors have not recovered completely.
The sharpest contraction was in the construction sector (-50.3 per cent), followed by trade, hotels, transport, storage and communication (-47 per cent) and manufacturing (-39.3 per cent).
“Even as the economy is seen to be on the mend, contractions in these sectors are likely to continue, although at a slower pace,” the report said.
It has estimated the economy to contract by 13.5 per cent in the quarter ended September, and the contraction in FY21 is likely to be around 9.5 per cent unless the government takes immediate initiatives such as increased public spending as well as incentivising lending, to revive the moribund economy.