InvestorQ : Why has Nirmala Sitharaman been saying that economy is recovering while ICRA and CRISIL are downgrading GDP growth for FY21?
Dia Deshpande made post

Why has Nirmala Sitharaman been saying that economy is recovering while ICRA and CRISIL are downgrading GDP growth for FY21?

Answer
user profile image
swati Bakhda answered.
2 weeks ago


If you carefully read the statements made by the finance minister, she has pointed out specifically that some of the macroeconomic indicators are hinting at a recovery in economic growth. That does not mean positive growth, but reduction in negative growth.

What Nirmala Sitharaman has stated is that there are some clear greenshoots visible in the GDP growth potential. The RBI itself has projected negative GDP growth of -8% to -10% for the fiscal year 2020-21 and near double-digit contraction may still happen.

However, the FM has pointed to three very important macro factors that give hope that the worst may be over and a recovery may be underway. Firstly, manufacturing activity as evident from the PMI Manufacturing crossed 56 levels revealing positive momentum in the midst of industrial expansion.

Secondly, GST collections for September at Rs.95,480 crore is the highest since April and hints at factory activity and services getting back on track. While it is still below the target, it reveals that the factory output is at least getting back to pre-COVID levels.

Finally, passenger cars factory dispatches in Sep-20 are up by 25% on an average. This has been a key problem area over the last 3 years due to weak demand and limited financing options. But the real test will be in dealer sales and not factory dispatches.