Though there is a significant rebound in the economic activity following the lifting of pandemic-related restrictions, the expectations of a quick recovery must be tempered in tune with ground realities. While the big jump in the GST collections is a positive development, several parameters — inflation, unemployment, subdued private consumption and investment and a crippling informal sector — are still in the red zone and the economic recovery path is going to be long and arduous. The unemployment in October rose to 7.75% from a three-month low of 6.86% in September. The latest data from the Centre for Monitoring Indian Economy showed that rural unemployment has jumped to 7.91% from 6.06% the previous month, whereas urban joblessness dropped to 7.38% from 8.62%. The rural distress is of particular concern. Though manufacturing and services sectors have been adding jobs in recent months in the wake of easing of Covid-19 restrictions, rural jobs have been shrinking. A look at the MGNREGA demand, which provides an idea about the availability of informal jobs, shows that this segment is still not out of the woods. Data on the FMCG (Fast Moving Consumer Goods) demand showed that it shrunk by 0.5% in volume terms in the July-September 2021 quarter. It must be pointed out that the economic recovery may not be strong and durable in the absence of adequate purchasing power in a vast section of the workforce.
While the surge in lending by banks is a positive trend, the medium and small enterprises, which contribute about 45% to the total manufacturing output, need a boost in terms of low-cost flexible loans. There is a strong case for more targeted support to MSMEs, which number around 60 million units, to ensure steady economic recovery. On its part, the Central government can now afford to loosen the purse strings and take measures to spur demand. The improved finances give the government enough elbow room to cut down fuel excise duties and clear the GST compensation dues to the States. The Centre’s revenues from excise duties, mainly on fuels, stood at Rs 1.71 lakh crore during April-September, constituting 79% growth over the same period two years ago. According to the Reserve Bank of India’s quarterly Consumer Confidence Survey for September 2021 to gauge public perception, more people think employment is worse off than it was a year ago. There is a mismatch between the projections of economists and the perceptions of the common public about the state of the economy and about the immediate future. While most experts expect India to post an economic recovery that is above the world average in the coming year, public perception of key economic variables like inflation, employment, income and spending is far less optimistic.
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