Economy Treads Cautiously Optimistic On Pent-up Demand: ASSOCHAM

After a tough first quarter, the Indian economy is finding demand back on the back of a strong level of activities in a construction-related business, consumer durables like air-conditioners, refrigerators and other electrical gadgets and rural segments of the fastmoving consumer goods. Even domestic travel and tourism is witnessing an unleashing of pent-up demand, giving a pleasant surprise, as per an ASSOCHAM assessment.

The ASSOCHAM note avoided giving any numbers to the growth projections although, both the first and second quarters of 2021-22 would be far better than the comparable period of the last fiscal.      

"Although, hazarding a guess in the middle of a global pandemic is not desirable, last 2-3 weeks have been quite encouraging in terms of unlocking of Covid-19 restrictions in most of the states, leading to restoration of trade, pick-up in industrial activities and inventory going down," ASSOCHAM Secretary General Deepak Sood said.

Economy Is Finding Its Demand On The Back Of Strong Level Of Activities

"While we remain as anxious as all right-thinking citizens about visible lapses in the Covid appropriate behaviour, some of the popular travel destinations for summer months are witnessing a rush of tourists. We would urge the citizens as also the businesses to strictly adhere to the prescribed behaviour like social distancing, mask-wearing, sanitation. We cannot afford to have another wave of pandemic and must do all it takes to prevent it."

The ASSOCHAM feedback suggests that construction activities that were suspended from the middle of April have resumed in several sectors like road building, repairs and maintenance and residential projects. "Average city dwellers, especially in the upper-middle class and affluent segments have taken up their pending construction and repair or up-gradation of their homes. The Work from Home (WFH), which is being increasingly adopted across different sectors, has created additional demand for furniture and fixtures at homes, including computer hardware."

Despite the increase in fuel prices, the use of private vehicles over public transport is adding to the fuel consumption, while automobile production and sale remains constrained by external issues like global shortages of microchips and semiconductors. "We expect the demand for farm equipment, machinery and tractors to remain robust and may pick up traction after the monsoon season," the chamber note stated.

"What gives us a great relief is that the informal sectors, which remain the lifeline of the economy and the people, are returning. We feel reassured when we see masons, electricians, car mechanics, or roadside eateries coming back. Eventually, the informal sector seeps in and gels well with the formal economy, giving us the kind of growth needed for meeting the national aspiration," Sood said. Migrant workers are fast returning to cities and industrial hubs.

While inflation remains a sore point, things should ease with monsoon becoming active in most parts of India. "RBI's stance on remaining accommodative on policy interest rates is appropriate. Even with the low-interest rates, the credit demand is yet to pick up; raising of rates would not be an option for the RBI," Sood said.