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Indian economy is bouncing back; focus on structural reforms need for sustained growth

MUMBAI: Indian economy has bounced back from the drop it had witnessed due to Covid pandemic and the lockdown thereafter but it would take structural reforms for the country’s GDP to grow beyond a particular level.

The Indian economy may have lost close to Rs 20trn ($270bn), 10.6% of its GDP between April and Sept 2020 due to mobility restrictions. Even as economic activity appears to be gradually returning to pre-COVID levels but we expect India's real GDP to contract 10.5% in FY21, the report said.

Last month, the government announced a few long-standing reforms related to the labour and agriculture sectors. Policy-makers also announced measures to boost manufacturing and focus on attracting higher foreign direct investment flow to optimise the golden opportunity to gain share in global supply chain shifts.

While these reforms are positive for medium-term growth, their effective and efficient implementation is the key, the report added.The report said that the country has managed the inflation quite well so far. The inflation remains under control which may be one less thing to be worried about for the policy makers.

“We expect the government to maintain spending in FY22 and increase allocation towards public health and infrastructure spending to support growth. A greater focus on privatisation could be explored to help keep a check on fiscal slippage,” the report added.