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The Finance Minister Smt Nirmala Sitharaman had said that the demand for consumer goods has increased considerably during the festival months. October-to-March is the festival season in India. Based on the “Nikkei Manufacturing Purchasing Manager's Index (PMI)”, the Finance Minister said that the “economic activity had picked up in the country after the easing of pandemic restrictions and helped by various government measures.”  A PMI reading above 50 indicates expansion and below than 50 denotes contraction. The analyses have shown that PMI increased from 52 in August to 56.8 in September, the highest since January 2012, said the Minister.
Strengthening the “animal spirits”, a sharp Y-o-Y (year-on-year) double digit increase is noted for the festival sales of car. The two-wheelers sale has seen growth in Y-o-Y estimates in some parts of the country.  The exports picked up to positive quadrant with the recovery in components including farm exports, shipments, pharmaceuticals, engineering goods and chemicals contributing to the rise. The FOREX reserves are booming. India’s foreign exchange (Forex) reserves stand at around US$ 555.12 Billion on 16 October 2020, the highest ever. The international agencies have predicted that Indian economy would bounce back in 2021-22 with around 8 per cent growth in GDP.  As per the IMF estimates, Indian economy was the fastest-growing large economy till recently, but has been overtaken by China. In 2019-20, India’s GDP growth was 4.2 per cent, while China’s was 6 per cent in 2019.
However, the IMF estimates predict that  India’s GDP growth to overtake China’s next year as they  predicted India to expand 8.8 per cent, while China is expected to have growth rate of 8.2 per cent.
Yet another policy announcement is “loan moratorium”.  On November 2, 2020, the Apex Court is scheduled to hear the loan moratorium petitions and will communicate “ how to waive interest on interest”. The affidavit filed by the Centre, through the Ministry of Finance, brings relief to a large section of borrowers. The affidavit said the difference between compound interest and simple interest that deposited in the account of borrowers by November 5.
To put the things in perspective, in March 2020, loan moratorium was announced as part of Atma Nirbhar economic package to all term loans. This was not a loan waiver but an EMI deferral scheme. The  borrowers needed to pay back the staggered EMIs later. 
This announcement was only for the loans up to Rs 2 crore that are taken from banks, NBFCs (non-banking finance companies) and state co-operative banks. This include borrowers of housing finance companies and microfinance companies. The MSME, education, housing, consumer durables, etc are eligible for this loan moratorium.
The Finance Minister Smt Nirmala Sitharaman said “there were visible signs of revival in the economy but the GDP growth may be in negative zone or near zero in the current fiscal. This is primarily because of a huge 23.9 per cent contraction in the economy in the first quarter of current fiscal (April-June)”, she said. The Minister also clarified that a complete lockdown strategy imposed on March 25th was based on a framework of  putting lives before livelihood. 
Similarly, the global foreign direct investment (FDI) plummeted by 49% in YoY in Q1 2020, the fall by up to 40% for the year. As per a UNCTAD report, the FDI flows to EU turned negative for the first time ever, falling to -$7 billion from $202 billion, while flows to the United States fell by 61% to $51 billion. 
The Monetary Policy Committee of RBI has announced their calculations that the economic growth to be plummeted by 9.5 per cent in 2021-22. The MPC has kept the policy rates at “status quo” as the inflation was above 6 per cent, which is the upper bound for the bank’s long term policies.  Given the liquidity infusion into the market by fiscal and monetary policy stances, the epidemiology of the virus can predominantly determine the economic upturn, along with the strong fiscal and monetary policies on board in continuum. 
This is a prelude analysis prepared prior to the announcement of Atmanirbhar Bharat Abhiyan.3. 
(This Commentary was prepared for the World Air Service of AIR, Ministry of Information and Broadcasting, Government of India).
Lekha Chakraborty is Professor, NIPFP, New Delhi and also Visiting Professor, American University.
The views expressed in the post are those of the authors only. No responsibility for them should be attributed to NIPFP.
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