Recovery consumption based, shallow & short lived

Description

Context: The Reserve Bank of India (RBI) has said the ongoing economic recovery is based on a revival of consumption, while the key thing is to whet the appetite for investment, especially the “missing” private investment.

Details:

According to an RBI report, there is little doubt today that a recovery based on a revival of consumption is underway. The jury leans towards such recoveries being shallow and short-lived.
All engines of aggregate demand are starting to fire; only private investment is missing in action. The time is apposite for private investment to come alive.
The central bank said economic activity is gaining steam as Covid pandemic incidence recedes and the ongoing vaccine rollout releases pent-up optimism.
In terms of nominal GDP, 96 per cent of pre-pandemic economic activity has been restored, assuming that the National Statistical Office’s first advance estimates hold.
Early corporate results for Q3:2020-21 indicate that sales continue to improve as they rise out of contraction; combined with a fall in raw material costs and saving on account of lower interest expenses, there has been a jump in operating profits.
It said pro-cyclical industries in the non-financial sector — auto, steel and cement — registered a sharp rebound in volumes, increase in output prices in a strong pricing environment and adopted cost cutting measures.
According to the RBI, perceptions have improved significantly over all preceding rounds of RBI consumer confidence survey conducted since September 2020.