Subject: Economy

The recent trajectory of the Indian economy has sparked debates about whether it has truly experienced a V-shaped recovery post-pandemic. A careful analysis of various economic indicators and sectoral performance presents a nuanced picture.

Evidence Supporting V-Shaped Recovery

• GDP Growth Trajectory:

  • According to MoSPI, India recorded a robust 9.2% growth in FY2023-24, indicating a sharp rebound from the pandemic-induced contraction.
  • The construction sector demonstrated remarkable resilience with growth rates between 8.6% to 10.8% in FY2024-25, reflecting infrastructure revival.

• Investment and Consumption Patterns:

  • The Asian Development Bank (ADB) projects growth of 6.4% in FY2023 and 6.7% in FY2024, driven by private consumption and investment.
  • Private sector participation and capital formation have shown significant improvement, indicating restored business confidence.

Challenges to V-Shaped Recovery Narrative

• Uneven Sectoral Performance:

  • The manufacturing sector shows varied growth rates across quarters, suggesting an inconsistent recovery pattern.
  • ICRA's projection of 6.3% growth for FY2024-25 highlights concerns about uneven private consumption.

• Employment Concerns:

  • CMIE data shows fluctuating unemployment rates - 9.2% in June 2024 to 7.8% in September 2024.
  • Different methodologies indicate rates between 3.2% to 4.9%, suggesting structural labor market challenges.

Way Forward

• Policy Measures:
  • Need for continued focus on Production Linked Incentive (PLI) schemes to boost manufacturing.
  • Implementation of National Logistics Policy to reduce costs and enhance competitiveness.

While India shows signs of recovery, characterizing it strictly as V-shaped would be an oversimplification. The recovery pattern resembles more of a K-shaped trajectory, with some sectors and population segments recovering faster than others. This necessitates targeted interventions through initiatives like PM Gati Shakti and National Monetization Pipeline to ensure inclusive and sustainable growth.