New Delhi: Under the second wave of COVID-19, the Indian economy showed signs of slowing in June as local lockdowns opened up affected activity. It is now expected that monetary policy makers will consider keeping interest rates at a record low in next week’s meeting to help in a sustainable recovery.
Here are the reasons for keeping interest rates at record lows
Business activity affected: The performance of both the manufacturing and services sectors, which contribute more than two-thirds of India’s GDP, were severely impacting the overall activity indicator by 6 to 5. This level was not seen since February and remains the first decline since May. According to Bloomberg, the figures for 2020.
The Markit India Services Index slumped to 41.2 in June, up from 46.4 in May, indicating a contraction below 50. A similar survey also indicated shrinking activity in the manufacturing sector, taking the overall index deeper into contraction territory, according to the report.
On the back of stagnant global demand, exports grew 48.3 per cent year-on-year in June and 69.4 per cent year-on-year in May. Foreign demand for engineering goods and chemical products aided the sector, along with shipments of agricultural products.
Consumer activity also declined
According to Kenichi Ayukawa, president of the Society of Indian Automobiles, retail auto sales, which indicate a trend in consumer demand, improved, even as it faced a steep rise in commodity prices, semi-conductor shortages and fears of a third wave. faced. the creator. However, due to the second wave impacting rural demand, sales of motorcycles and two-wheelers registered an improvement in June. The tractor segment also improved last month, with prospects of a better monsoon helping the sentiment.
industrial activity
Industrial production also saw a slow expansion, rising 29.3 per cent in May from a year earlier, compared to around 135 per cent in April. Industrial production fell 8.0 per cent month-on-month from April, said Gupta of Bloomberg Economics, citing the lockdown that shut retail.
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