The year 2021 will be a positive one for the Indian economy as it will see double digit growth, according to a recently released report by Deloitte.
India saw an historic economic contraction of 23.9 per cent in this fiscal year owing to the toll of the pandemic on its internal and external economic activities. Due to the national lockdown taking effect from March this year, mobility, activity and trade were negatively affected for many months of the current fiscal year.
However, even after touching unprecedented lows, major sectors of Indian economy – such as manufacturing – have scripted a great comeback and helped revive the Indian economy enough for many economic experts to predict a double-digit growth of 10% next year.
According to the Voice of Asia report prepared by Deloitte, the PMI manufacturing index of the country is at its highest since 2008. This is a positive sign for India’s ambition of becoming the biggest manufacturing hub of the world and cementing its place in the global supply chain over the coming few years.
As the world looks away from China as its manufacturing hub in the wake of the pandemic for which Beijing is widely held responsible, it is the perfect opportunity for India to boost its manufacturing sector and welcome foreign investments into the sector.
After all, the recovery made by the manufacturing and other industrial sectors of the country has already helped the economy move away from a double-digit contraction to a 7.5 percent contraction in the second quarter of the present fiscal year.
This economic recovery was driven by rising car sales and diesel consumption in the second quarter of this financial year. Staying inside for nearly six months and practicing austerity in spending, Indians saved money and bettered their financial situation during the lockdown. These savings are now being used to realise personal goals such as owning a car or travelling.
The government has also reported higher goods and services tax collections, which indicates higher supply due to pent-up demand since the phased unlocks and higher consumption during the festive season.
The report, however, warns of difficulties ahead if a fresh wave of pandemic hits the nation. The economic recovery rate is bound to be affected negatively if COVID-19 cases reach high figures again next year. The arrival of vaccines in India, though, certainly offers a certain degree of security to both the health and economic sector.
According to the Deloitte report, three important factors – job growth, a strong hospitality and service sector recovery and a continued healthy recovery of private demand – will drive economic revival and growth next year.