India's economic recovery stumbles, setting stage for sustained low rates

30th July,2021

India's economic recovery stumbles, setting stage for sustained low rates


In June, India's economy exhibited indications of cooling as the gradual easing of localised lockdowns hampered business, a point that is likely to persuade monetary policymakers gathering next week to retain interest rates at record lows in order to nurture a long-term recovery. Contractions in India's manufacturing and services sectors, which account for more than two-thirds of the country's GDP, pushed the overall activity indicator down to 5 from 6, the lowest level since February and the first decline since May 2020 data. A three-month weighted average is used to smooth out volatility, and a shift to the left indicates a loss of momentum. While the devastating second wave of Covid-19 has passed, the economy is still reeling from the sluggish pace of vaccines and the possibility of a new wave. According to Abhishek Gupta, India economist at Bloomberg Economics, a basket of high-frequency, alternative, and market indicators like as retail activity and traffic congestion aren't exhibiting the type of significant rebound that was predicted.