Some signs of a fast recovery

Some signs of a fast recovery

The economic tea leaves seem to suggest that a welcome rebound is underway, as India ‘unlocks’ after the Covid-19 nationwide lockdown. Notice that production capacity at Hindustan Unilever, the biggest consumer goods company here, has now reached near-normal levels. eCommerce sales are back at pre-Covid numbers. Further, Maruti Suzuki, our largest carmaker, is reportedly anticipating a V-shaped recovery in industry volumes in the second half of the fiscal, on the back of pent-up demand. Meanwhile, private placements of corporate bonds have surged a handsome 94% in May (over the like period last year), aggregating Rs 0.84 lakh crore.

Also, digital retail transactions have grown by over 40% in May, over the previous month. Further, the figures show that the crucial MSME sector has accessed credit of over Rs 50,000 crore — under quite favourable terms — in the past couple of months. Other indicators like electricity consumption and automotive fuel sales are all buoyant, as is freight. In agriculture, wheat procurement has touched an all-time record and crop sowing in this kharif season has already increased 39%, with a big jump seen in oilseeds, coarse cereals, pulses and cotton. Fertiliser usage has soared some 98% in May. The government needs to purposefully leverage the anticipated uptick in demand to proactively boost investment and ease supply bottlenecks.

In tandem, there’s the need to fast-forward financial sector reforms to boost inflows and rev up funding for infrastructure. Policy must create a vibrant market for debt instruments including corporate bonds to transparently allocate resources for long-gestation projects via modern, arm’s-length finance. The yields on corporate bonds of benchmark entities such as PFC, REC and HDFC have plunged as much as 35 basis points since June 8, the day the Centre removed most restrictions on economic activity. The lower yields and higher bond prices would step-up demand. In equities, select large-caps have hit record highs. The added buzz in mid-caps and penny stocks do point to a strong recovery.