It may be premature to declare the economy has revived


The goods and services tax (GST) revenue collection is a useful proxy to get a sense of consumer demand. The September collection was Rs 95,480 crore, an increase of about 4% over the corresponding period of the previous year.

The government has interpreted the data as an indication that the economy is on the mend. An assessment of the state of recovery has to differentiate between an uptick after the economy began to transition out of the lockdown, and the current state of the economy in relation to the level of economic activity in 2019-20.

The staggered opening up of the economy after a near shutdown in April has improved things. But the economic data doesnโ€™t support the case for a recovery in relation to the previous fiscal. Employment data put out by CMIE shows that even as the unemployment rate by the end of September fell to about 6.6%, the size of the labour force simultaneously shrank. This suggests that some of the people looking for jobs a while ago may have dropped out because they are simply not available. Separately, the investment proposals collated by CMIE from financial statements of financial firms shows that there is little appetite for fresh investments.

Read also: Covid may have peaked in September, economic recovery on, finance ministry report saysย 

Therefore, it may be prudent for the government to consider a targetted stimulus as the economy remains stressed.

.



Source link

Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.