Strong Demand Keeps India on Path to World's Fastest Growth
Comment of the Day

August 31 2021

Commentary by Eoin Treacy

Strong Demand Keeps India on Path to World's Fastest Growth

This article from Bloomberg may be of interest to subscribers. Here is a section:

“The print shows that the economic cost of the virulent second Covid-19 wave was much lower than the first,” said Gaura Sen Gupta, an economist with IDFC First Bank Ltd. “Details reveal a K-shaped recovery with much stronger growth in industries and muted growth in services,” she said.

A better-than-expected manufacturing performance and a milder hit to services, combined with a robust pace of vaccinations, also helped keep the annual growth outlook for the economy steady at 9.2%, according to a Bloomberg survey. That pace will be the quickest among major economies, surpassing China’s 8.5%.

The rupee completed its biggest monthly gain since May before the data was released, while stock indexes hit a new high amid optimism about the economy’s strong recovery. Bonds were up slightly.

Latest high-frequency data showed the impact of pandemic restrictions were less severe than last year, enabling demand to recover quickly in the consumption-driven economy. Loans for consumer durables and vehicle purchase, as well as to real estate and small businesses, grew in July, both in terms of month-on-month and from a year earlier, data published by the Reserve Bank of India showed.

Eoin Treacy's view

India’s large young population and highly developed pharmaceuticals sector have allowed it to come through the pandemic in a stronger position. Simultaneously, the economy should continue to benefit as a primary destination for low-cost manufacturing as companies re-evaluate the wisdom of relying entirely on China’s workshop of the world model.

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