Indian Economy Recovers Better but Far From Comeback: CARE
India’s economy is recovering at a better-than-expected pace; however, there is a long wait before it makes the comeback. On the basis of three broad aspects of the economy – production, consumption, and investment, it is found out that the economy is on a comeback path as select parameters have seen a gradual but sustained improvement, but, it is still far from a comeback, according to Care Ratings’ Economic Comeback Meter.
While an index of -2 to 0 shows deterioration; 0 to 5 shows ‘on comeback path’; 5 to 8 represents comeback; and 8 to 10 indicates growth path; the country’s economic indicators fell in the ‘on comeback path category in the four months to November 2020.
CECM stood at 0.58 in August, 1.1 in September, 1.79 in October, and 2.62 in November. In the comeback tracker, production is represented by power generation, e-way bills, and non-oil-gold imports. On the other hand, consumption is measured by the sales of passenger cars and 2-wheelers, petrol consumption, and GST collections. Further, the investment is gauged on the growth in bank credit, and debt issuance in the market.
The significance of CECM is to come to a single conclusion of economic growth as the interpretation of major indicators has been a puzzle. Do we compare month-on-month growth rates or year? Also, do we compare year-on-year growth rates with the previous year or the previous month? Judgments vary depending on the assessment of month-on-month growth, year-on-year improvement, comparison of year-on-year growth rates with the rate of increase in the previous year or month, Care Ratings said.
Meanwhile, India’s economy had plunged 23.9 per cent in the first quarter, which quickly recovered to a contraction of 7.5 per cent in Q2. As the unlock process started, it was but obvious that month-on-month numbers would get better. Also, the case of pent up demand or preparation for the same would tend to create spikes in production numbers.