Monthly Economic Review June 2020

MACROECONOMIC REPORT JUNE 2020 ECONOMIC DIVISION 1Abstract As on 30th June, 2020, COVID-19 has spread into more than 200 countries including India with total number of confirmed cases exceeding one crore and the virus claiming more than five lakh lives. Globally, lock-downs were most stringent from mid-March through mid-May with economies gradually reopening since then. India currently ranks fourth in terms of confirmed as well as active COVID-19 cases after US, Brazil and Russia. As on 30th June, COVID-19 in India has infected 5,82,147 people and claimed 17,322 lives. However, the graded, pre-emptive and pro-active steps taken by Government of India along with States/UTs for prevention, containment and management of COVID-19, have taken the recovery rateupto59per cent. India imposed a strict lock-down from 25th March, 2020. April, 2020 was the month of economic standstill with restrictions on various activities eased in May, 2020 as Government of India made a courageous choice of supporting livelihoods that in turn made the containment of the pandemic more challenging. As restrictions were further eased, the country entered the unlock phase in June, 2020. The loss of economic output from more than two months of lock-down was first triggered from the supply side as labour stayed away from work. The demand side caused further loss of output as consumption of goods and services dependent on customer mobility fell. This twin supply-demand shock on output subsequently led to loss of income, which caused further decline in consumption resulting in further loss of output. Owing to these unprecedented COVID-19 induced supply-demand shocks, IMF’s June, 2020 WEO update projects growth of India’s output at (-)4.5 per cent in2020-21 andthatof world’s at(-)4.9per cent. Readings of high frequency indicators in India, however, indicate emergence of green-shoots. Total digital retail financial transactions via NPCI platforms increased sharply from Rs. 6.71 lakh crore in April, 2020 to Rs. 9.65 lakh crore in May, 2020. Consumption of petroleum products increased by 47 per cent from 99.37 lakh metric tonnes in April to 146.46 lakh metric tonnes in May moderating its year-on-year (y-o-y) contraction from (-) 45.8 per cent to (-) 23.2 per cent across the two months. Latest data indicates Kharif sowing at a 104.3 per cent higher than previous year’s acreage with Rabi procurement in full flow in respect of oilseeds, pulses and wheat, benefiting from the bumper harvest. Within a period of 2 months, India, starting from scratch, has become the world’s second largest manufacturer of Personal Protective Equipment (PPE). Electricity consumption saw lower y-o-y contraction in growth rates from (-) 24 per cent in April to (-)15.2 per cent in May to (-)11.3 per cent in June (till 28th June). Total assessable value of 2E-Way bills picked up by a massive 130 per cent in May compared to April 2020, tracking surge in inter and intra-stateroad-based movement of tradable goods. In June, it has further increased by 34 per cent over May 2020. Sustaining the momentum in economic activity, railway freight traffic improved by 26 per cent in May (8.26 crore tonnes) over April 2020 (6.54 crore tonnes). Average daily electronic toll collections, yet another indicator of freight movement by road, increased from Rs. 8.25 crore in April to Rs. 36.84 crore in May and further to Rs.50.9 crore in June (till 28thJune). Purchasing Managers Index (Manufacturing) has also consistently improved from 27.4 in April to 30.8 in May and further to 47.2 in June. In support, India’s forex reserves at USD 505.6 billion as on 19th June, continue to provide a crucial cushion to external shocks on the back of higher FDI, portfolio flows and low oil prices. This recovery is also evident in the Goods & Services Tax (GST) collections for June 2020 that clocked Rs. 90,917 crore at gross levels, 46 per cent higher than May and 181 per cent over April. These green shoots have a conducive policy environment to grow further and nudge the economy early on the path of economic recovery and growth. Policy environment was made conducive beginning March, 2020 when RBI and Government were able to correctly anticipate the economic downturn following the outbreak of the pandemic. RBI significantly reduced the repo rate by 75 basis points (bps) to 4.4 per cent and further to 4 per cent in May and injected huge amount of liquidity of approximately 3.9 per cent of GDP. With 100 bps cut in cash reserve ratio (CRR), 155 bps cut in reverse repo and increase in marginal standing facility to 3 per cent of net demand and time liabilities, attempts were afloat to enhance credit flow in the economy. The RBI also provided relief to borrowers allowing companies a three-month moratorium on loan repayments while SEBI protected the lenders byrelaxing thenorms related todebt default onrated instruments. Government of India on its part executed a well laid out strategy wherein it imposed lock-down to allow states to ramp-up their health and testing infrastructure while implementing “Pradhan Mantri Garib Kalyan Yojana” to provide immediate cash support to the needy. More than 42 crore poor people have so far received financial assistance of Rs 65,454 crore under the scheme. Procurement of wheat increased touching an all-time record figure of 388.3 Lakh Metric Tonnes (LMT) on 29th June, 2020. Minimum Support Price (MSP) of Rs. 73,500 crore was paid, benefiting 42 Lakh farmers. The next step was to convert the pandemic situation into an opportunity of taking the economy to newer heights. Accordingly, in May, 2020, Government adding to its past measures and that of RBI announced a consolidated stimulus package of Rs. 20 lakh crore. The stimulus package was pivoted on “Atma Nirbhar Bharat”, wherein MSMEs received a huge financial package in 3terms of collateral free debt, guarantee for subordinate debt through Funds-of-Funds and interest subvention scheme. Besides, the definition of MSME was changed to remove the disincentive against their investment and expansion. Other components of the package included three landmark ordinances related to Essential Commodities Act, Farmers’ Empowerment and Protection and Promotion & Facilitation of agricultural produce that will encourage people to invest in creating infrastructure and storage for agricultural produce, enable barrier-free trade in agriculture and also empower farmers to engage with various stakeholders. These reforms will create a more competitive and vibrant agricultural sector, bringing prosperity to majority of the population in rural areas and contributing to the growth of the Indian economy in the long term. Additionally, “Pradhan Mantri Garib Kalyan Rojgar Abhiyaan”, a rural infrastructure and employment generation scheme was launched for thebenefit of returneemigrants. The stimulus package is a set of reforms providing continuity to the initiative that commenced in 2014. It has accelerated the reforms at a time when the pandemic has constrained the fiscal envelope of the government and dampened the inclination of the people to spend, in view of economic uncertainty. Economic growth of pre-COVID times, as and when restored through fuller unlocking of the economy, will heavily lean on the reforms undertaken todayto enhance itspotential tomorrow. **** 4I. THEONSETOFCOVID-19:AGLOBALHEALTHSHOCK 1. The world is witnessing an unprecedented crisis since January 2020 with the highly contagious COVID-19 hitting major economies of the world in rapid succession. Since its first outbreak in Wuhan, China, it has infected more than 200 countries with total number of confirmed cases exceeding one crore and the virus claiming more than five lakh lives. The health shock, though global, has transmitted through different trajectories across countries in terms of total infections, mortalities and recoveries. The Advanced Economies (AE) of North American and West European region have been disproportionately impacted with more than 70 per cent of the total cases and more than 50 per cent of total deaths due to COVID-19 (Figure 1). The pandemic also quickly intensified in number of Emerging Market and Developing Economies (EMDEs) like Brazil, India, Mexico, Russia and Turkey, necessitating strict lock-downs. Globally, lock-downs were most stringent from about mid-March through mid-May with economies gradually reopening sincethen. Figure1:Trend inworld-wide spread ofConfirmed Cases andDeaths dueto COVID-19 Source:2019NovelCoronavirusCOVID-19DatarepositorybyJohnHopkinsCSSE 2. The detailed disaggregation of active cases, recovered cases and deaths across countries with more than 1.5 lakh cases may be seen at Annexure. Some countries like US, Spain and Italy have shown a high fatality rate while UK is showing a low recovery rate. There is a risk of a ‘second wave of infections’ as the economies unlock. The uncertainty associated with flattening of the COVID-19 curve, in the absence of a vaccine, poses a serious challenge. 5II. COVID-19 IN INDIA 3. In India, the first case of COVID-19 was reported on 30th January 2020. As on 30th June, COVID-19 in India has infected 5,82,147 people and claimed 17,322 lives. India currently ranks fourth in terms of confirmed as well as active COVID-19 cases after US, Brazil and Russia. While the total number of cases has been rising since mid-May, the active cases, as on date, are only 38 per cent of the total cases in the country and the death rate has been contained at a low of 3 per cent as compared with countries across the world (Figure 3). Figure2: Trajectory ofCOVID-19 spread inIndia Source:BasedondataaggregatedfromMoHFW&Stategovernmenthealthbulletins(IndiaCOVID-19 Tracker) Note: Active Cases= Confirmed Cases - (Recovered Cases + Deaths), Average Daily Growth Rate in Active Cases(Last5Days)=SimpleaverageofDoDgrowthratesofactivecasesinlast5days Figure3: Death Rates dueto COVID-19 inmajor countries Source:2019NovelCoronavirusCOVID-19DatarepositorybyJohnHopkinsCSSE Note:Deathrate=COVID-19deaths/Confirmedcases 64. A state-wise perspective to COVID-19 is crucial for understanding the epidemiology of the pandemic and the necessary macroeconomic policy response (Figure 4). As on 30th June, eight states-Maharashtra, Delhi, Tamil Nadu, Gujarat, Telangana, Uttar Pradesh, Andhra Pradesh and West Bengal contributed to 85.5 per cent of active caseload and 87 per cent of all COVID-19 related deaths in India. With India relaxing lock-down restrictions through May and unlocking in June, growth in active cases in Maharashtra, Delhi and Tamil Nadu has sharply risen in June, albeit slowly in Gujarat. On the other hand, infection curves of Madhya Pradesh, Rajasthan and Bihar appear to have relatively plateaued since end of May. Since mid-June, Telangana, Andhra Pradesh and Karnataka are witnessing resurgence of cases. In terms of testing progress in hotspot states as on 29th June, Delhi reported the highest testing rate at 25,860 per million, followed byAndhra Pradesh (15,618), Tamil Nadu (14,265), Maharashtra (7527), Gujarat (5688), West Bengal (4707), Uttar Pradesh (2877), Telangana(2095). Bihar reported thelowest testingrate at 1649per million.1 Figure4:COVID-19 infection curvein States (8000+ confirmed cases) 1 Populationdataisbasedonmid-yearpopulationprojectionfor2020fromUIDAI’sStatewiseAadhaarSaturationreport. 7Source:BasedondataaggregatedfromMoHFWandstategovernmenthealthbulletins(IndiaCOVID-19 Tracker) 5. The Government of India, in participation with States and UTs, took graded, pre-emptive and pro-active steps for prevention, containment and management of 8COVID-19 which are showing encouraging results in terms of consistently increasing recoveries. Guided by the urgent need to save lives -‘Jaan hai toh Jahan hai’, India resorted to a strict 21 days nationwide lock-down on 25th March, 2020 to contain the spread of COVID-19 in its early stages of infection in the country. With a gradual shift in strategy towards saving lives as well as livelihoods -‘Jaan bhi Jahan bhi’, India has entered the ‘Unlock India’phase from June 1with phased resumption ofservices and businesses. CONTAINMENT MEASURES PolicyTool Obligatory shut Closureofpublic Nation-wide Travel downof School closure places/cancellation lock-down bans/restrictions economic ofpublicevents activities Policy impact/progress(As on27thJune, 2020)  Flattening thecurve India has reduced its doubling rate of infections from the initial 4 days at the time of lock-down to 7 days in earlyApril to 26 days as on June 27, flattening the curve to a great extent. Had there been no lock-down (assuming doubling every 7 days) the number of confirmed cases would have been 3000percent higherthan the actual number as on27thJune.  Reducinggrowth rate of newcases and containing spread Recoveries have outpaced active cases with difference nearing 1 lakh. The number of active cases stands at 1,97,387 while the number of cured cases is 2,95,880. Recovery rate now stands at 58.13 per cent. Growth rate of active cases also stands lower at 2.6 per cent (in last 5 days) as compared to previous months.  Improving COVIDrelated health carecapacity 1039Hospitals (Beds-1,76,275 isolation, 22,940ICU,77,268oxygen supported) 2,398Health Centres (Beds-1,39,483 isolation, 11,539ICU,51,321oxygen supported) 8,958Care Centres (Beds-8,10,621) With the utilisation rate of hospital beds at less than 20 per cent (active cases/isolation beds), India has kept the number of cases below the capacity of the healthcare infrastructure in almost all districts.  Increasingcapacity forTesting From limited COVID-19 tests in Jan 2020, total cumulative number of samples tested has risen to 79,96,707with 1026diagnostic labs dedicated toCOVID-19.  Savinglives The lock-down has prevented thousands of potential deaths. The WHO Situation Report 154 dated 22nd June, 2020 shows that India has one of the lowest deaths per lakh population. India’s cases ofdeath perlakh population is 1 as against theglobal average of6.04. 9III. POLICYDILEMMAUNDERLYING COVID-19 –‘Lives vs Livelihood’ 6. The containment measures may have allowed ramping up of the health and testing infrastructure in the country and arresting the spread of the virus. However, the lock-down and social distancing measures have had an adverse effect on the economy as there is an unavoidable trade-off between flattening the infection curve and steepening of the recession curves (Figure 5). Figure5: Trade-offbetween flattening COVID-19 infection curveand steepening ofrecession curve NewCases NewCaseswithout containmentpolicies ForcedMedicalRationing Numberofhospitalbedsavailableforseverecases NewCaseswith containmentpolicies Time Recessionwithout containmentpolicies Recessionwith containmentpolicies Severityofrecession Source: Adapted from Gourinchas, P-O (2020), “Flattening the Pandemic and Recession Curves”, online manuscript. 7. Themagnitudeand virulence ofspread ofCOVID-19 has, therefore, led the world to deal with the‘livesvs livelihoods’debate. Toflatten theepidemic curve, contain the virus outspread andsave ‘lives’,measures likelock-down,travel restrictions and strict social 10 serusaemnoitagitiM evrucnoissecergninepeetS Severecasesrequiringhospitalizationwithoutcontainmentpolicies Severe cases requiring hospitalization with containment policiesdistancing norms were implemented. But these containment measures have had detrimental effect on the ‘livelihoods of people’ as it halts ‘non-essential’ economic activity. The pandemic has triggered both supply and demand side shocks across economies around the world (Figure 6). Figure6:Economic Implicationsof theContainmentMeasures takento deal withthe Pandemic First Order Effects Second Order Effects Source:Adapted from Estupinan, Xavier and Sharma, Mohit and Gupta, Sargam and Birla, Bharti, “Impact of COVID-19PandemiconLaborSupplyandGrossValueAddedinIndia(June17,2020)”. IV. POLICYIMPLICATIONSFORMITIGATINGCOVID-19 SHOCK 8. Government of India and RBI have taken prompt policy measures - both short term and long term - in a calibrated manner to reinvigorate the economy at the earliest so as to provideimmediaterelief to vulnerable households and firms. 11Figure7:Four-pronged strategy to combat theCOVID-19 challenge FISCALPOLICYMEASURES PolicyTool Income Supportto Emergency support Govtloan Tax& States, guarantees, Quasi health Food measures Migrant contribution equity fiscal linking fund(INR security for labourers policy infusions measures borrowings changes 150billion) individuals/ forMSMEs toReforms households Policy impact/progressso far(as on 26thJune)  India has flattened the curve to a great extent with early containment measures supported by enhanced health infrastructure. One of the lowest death rates amongst affected countries Recoveries are increasingly outgrowingactive cases.Atestimonytograded,pre-emptive andpro-active approachoftheCentre andStates towardsprevention,containmentandmanagementofCOVID-19.  Record food grain production at 295.67 million tonnes in 2019-20 (3.7 percent higher than last year).As on 1226thJune,113LakhMetricTonnes(LMT)offoodgrainsliftedby36States/UTs,ofwhich- April:37.01LMTdistributedto74.03crorebeneficiaries May:36.42LMTdistributedto72.83crorebeneficiaries June:13.59LMTdistributedto27.18crorebeneficiaries  Procurementof wheatfrom farmers touchedanall-time recordfigure of385.6LakhMetricTonnes(LMT)on 23rdJune,2020surpassingtheearlierrecordof381.48LMTachievedduring2012-13. MinimumSupportPrice(MSP)  Rs. 73,500 crore to 42 Lakh farmers towards MSPfor wheat, thereby alleviating the added rural distress due toreversemigrationofpeoplefromcitiesamidthepandemic. PradhanMantriGaribKalyanYojana  FinancialassistanceofRs.65,454croretomorethan42crorepoorpeople  PM-KISAN:Rs.17,891croreto8.94crorebeneficiaries(firstinstallment)  WomenJanDhanaccounts:Rs.13,952croreto20.65crorewomen(3installments)  Oldagepersons,widows,disabled:Rs.2814.5croretoabout2.81crore(2installments)  Building&Constructionworkers:Rs.4312.82croreto8.52croreworkers  PMUYcylinders:2.3croredeliveredforApril&May,2.1crorebookedforJune MGNREGS  DailywageincreasedfromRs.182toRs.202tobenefit136.2millionhouseholds  Inresponsetoincreasingworkdemand underMGNREGAsinceApril2020,more than105crorepersondays ofworkhavebeencreatedinFY2020-21sofar.  M/oRailwayshasidentifiednumbersofrailwayworkstobeexecutedthroughMGNREGS. GaribKalyanRojgarAbhiyaan  Rs.50,000croreforbuildingdurableruralinfrastructure  116districts identified in 6 states of Bihar, Uttar Pradesh, Madhya Pradesh, Rajasthan, Jharkhand and Odisha (largeconcentrationofreturneemigrantworkers)  160 infrastructure works under 25 broad areas identified for employment in villages: rural housing for the poor, plantations, provision of drinking water through Jal Jeevan mission, Panchayat Bhavans, community toilets,ruralmandis,ruralroads,CattleSheds,AnganwadiBhavansetc.  Expectedtocreateemploymentforthousandsofworkersandgenerate8lakhman-days ofemploymentbythe endofOctober2020.  Government to pay Employee Provident Fund (EPF) contributions on behalf of employees and employers (12% each) for March toAugust 2020, for formal sector with up to 100 employees, where 90% of them are earning less than Rs. 15,000 per month. Contribution rate cut from 12% to 10% for non eligible employees.Non refundable advance of Rs. 5767 crore from EPF accounts benefitted 20.22 lakh members. Schemeintendedtobenefit48millionworkers.  25% reduction in rates for tax collected or deducted at source on non-salaried specific payment until 31 March2021.  Due date for all income tax returns, tax audits and assessment for FY2019-20 extended to November 2020; immediaterefundstocharitabletrust,non-corporatebusinessesandprofessions. 13 Pending income tax refunds up to Rs. 5,00,000 and GST/custom refunds to be cleared. From 1stApril to 21st May,2020,CBDTissuedtaxrefundsofRs.26,242croreto16,84,298assessees.  Deadline for filing returns of Goods and Services Tax for March, April and May extended till June 30. No interest,penalty or late fee charges for companies withless than Rs.50 million turnover,interest rate reduced to9%forcompanieswithturnovergreaterthanRs.50million. AatmaNirbharBharatPackage-MSME  EmergencyCreditLine Guarantee Scheme (ECLGS):Rs.79,000croreloans sanctionedtoMSMEs byPublic & Private Sector Banks as on 23rd June, 2020, of which more than Rs 35,000 crore has already been disbursed.Thishashelped19lakhMSMEs&otherbusinessesrestarttheirbusinessespostthelock-down.  Additionalcredit:Rs.3lakhcrore  ExtendedPartial Guarantee Scheme to help NBFCs & MFIs:Approvals have crossedRs. 5500 crore, another Rs.5000croreunderprocessofapproval  2%Interestsubventionscheme onprompt repaymentofShishuLoansunderPradhanMantriMUDRAYojana fora periodof 12 months- tohelp small businesses maintain cashflows by reducingcost of credit(Estimated cost-Rs.1,542crore).Schemeexpectedtosupportrevivalofsmallbusinessesandgenerateemployment.  “Distressed Assets Fund–Sub-ordinate Debt for MSMEs”: Guarantee cover worth Rs. 20,000 crores to promoters who can take debt from the banks to further invest in their stressed MSMEs as equity. This will supportaround2lakhMSMEsandprotectlivelihoodsofmillionswhodependonthem.  Special lending programme for street vendors of up to INR 10000 to finance their working capital, targeting about5millionstreetvendors.  Rs.900billionequityinfusionforDISCOMcompaniesbyStateownedenterprises(PowerFinanceCorpsand RuralElectrificationCorps)  Support to state governments: Devolution of Central taxes and duties (Rs. 92,077 cr) to states in April and May; Revenue Deficit Grants to states (Rs 12,390 cr) inApril and May;Advance release of SDRF funds; Rs. 4,113 crores from Health Ministry for direct anti-Covid activities; Ways & Means Advance limits of States increased by 60%; Extension of number of days for continuous overdraft from 14 days to 21 days (32 to 50 days for overdraft in a quarter); 75% of States net borrowing ceiling for 2020-21 authorised in March 2020 (14% utilized so far); Borrowing limits of States increased from 3% to 5% of GSDP, for 2020-21 (extra resources of Rs. 4.28 lakh crores), with part of borrowing linked to specific reforms (including recommendations of Finance Commission; Reform linkage in 4 areas, universalisation of ‘One Nation One Ration card’, Ease of Doing Business, Power distribution and Urban local body revenues; Unconditional increase of 0.50% , 1% in 4 tranches of 0.25%, with each tranche linked to clearly specified, measurable and feasiblereformactions,additional0.50%,ifmilestonesareachievedinatleastthreeoutoffourreformareas. 14MONETARYPOLICYMEASURES PolicyTool Easing Liquiditysupportin financial rupeesandforex Regulatory&DevelopmentalMeasures constraintsfor market States 15 gnicnanifer,FLS,sORTLT/sORTL /yuBXF spawslleS mret-troppuslatipacgnikroW fotnemrefed,muirotaromnaol gnicnaniffognisaednatseretni stnemeriuqer dessertsotecnailpmocfognisaE yfissalctessa smronnoitac reffublatipacfognisae,tnemrefeD stnemeriuqeregarevocytidiuqil& stimilerusopxepuorggnicnahnE sknabfo ecnailpmocgnirrefeD rednusIPFrofstnemeriuqer )RRV(etuoRnoitneteRyratnuloV troppustiderctropxE stimilgniworrobAMWdecnahnE lawardhtiwFSCfonoitaxalerdna selur Policy impact/progressso far(As on27thJune)  Reporate cut by115basis points since 27th March2020, amountingtoa total cut of 250basis points since the easingcyclebeganinFebruary2019.  Reverse repo rate cut by 155 bps since 27th March 2020 to 22nd May with the asymmetric cuts aimed at using LAFcorridorasaninstrumentofmonetarypolicy.  Amid heightened uncertainty and risk aversion exhibited by banks, credit growth remained muted with y-o-y non-food growth consistently declining from 7.02% as on 10thApril to 6.15% as on 22nd May 2020. Marginal improvementbeginningJunewithy-o-ygrowthofnon-foodcreditat6.21%ason5thJune.  Under RBI’s Special Liquidity Facility announced in March-April, 2020, SIDBI has sanctioned over Rs. 10,220 crore to NBFCs, Micro Finance Institutions & Banks for lending to MSME& small borrowers. National Housing Bank (NHB) has sanctioned its entire facility of Rs. 10,000 crore to Housing Finance Companies. This refinance by SIDBI & NHB is in addition to ongoing schemes through which over Rs.30,000crorehasbeensanctioned.  Monetary policy transmission to banks’ lending rates has improved. The 1 year median marginal cost of funds-based lending rate (MCLR) declined by 95 bps (February 2019-May 2020), of which 36 bps decline occurred from February 2020 to May 2020. The weighted average lending rate (WALR) on fresh rupee loans hascumulativelydeclinedby114bpssinceFebruary2019to15th May2020,ofwhich43bpsdeclineoccurred in March 2020 alone.WALR on outstanding rupee loans declined by 40 bps during October 2019-April 2020, ofwhich22bpsdeclineoccurredduringMarchandApril2020.  Domestic financial conditions have also eased as reflected in the narrowing of liquidity premia in various market segments. From March to May 2020, on average, interest rates on CPs, CDs, 10-year AAA corporate bonds, 91-dayTreasury Bills, 5 year andbenchmark10-year government paper have softened by150 bps,121bps,43bps,122bps,74bpsand92bpsrespectively.  Private placement of corporate bonds picked upsharplyby 94.1per cent (y-o-y growth) inMay(Rs.0.84lakh crore) as compared to a contraction of 22 per cent in April (Rs. 0.54 lakh crore). June is likely to see a still largerplacementasexcessliquiditypersistsinthesystem.  Outstanding gross mobilization by mutual funds, after falling from Rs. 13.1 lakh crore in March 2020 to Rs. 8.2 lakh crore inApril has improved to Rs. 8.6 lakh crore in May 2020. Overall,Assets under management of mutualfundshasimprovedfromRs.23.9lakhcroreinApril2020toRs.24.5lakhcroreinMay2020.  Rupee, on average, after depreciating by 2.5 percent from March 2020 (INR/USD 74.3) to April (INR/USD 76.2)moderatedtoINR/USD75.6inMayandcontinuedatINR/USD75.7(ason26thJune2020).  Foreign portfolio flows in Indian equity markets have consistently recovered in April and May after record outflows in March (USD 7.8 billion). May witnessed FPI equity inflow of USD 1.7 billion after an outflow of USD0.5billioninApril.ThisrecoveryofnetequityinflowshasfurtherimprovedinJune(USD3billionason 19thJune)anddebtoutflowshavealsocontracted(USD0.3billionason24thJune).  FDI in India recorded inflow of USD 73.45 billion in FY 2019-20, an increase of 18.5 per cent over the previousfiscal.  India’s forex reserves at USD 505.6 billion as on 19th June, continue to provide a crucial cushion to external shocksonthebackofhigherFDI,portfolioflowsandlowoilprices. STRUCTURALREFORMS PolicyReforms APMC Commercializ reforms Redefiningof Privatisation Land Powertariff ationofcoal FDIpolicy (three MSMEs ofPSUs reforms policy mining ordinances) Medium&Longtermimpact  Deregulationof the agricultural sector is expected toimprove returns tofarmers andhelp efficientlydistribute food grains, thereby addressing market fragmentation challenges and making agriculture more competitive. These reforms will enable barrier-free trade in agriculture produce, and also empower the farmers to engage withvariousstakeholders.  As the definitionnow stands, investedcapital will determine the entry intoone of the three categories (Micro, Small and Medium) while the turnover will determine the graduation to a higher category. Thus, merely increasing investment will not result in withdrawal of small unit benefits unless the turnover also becomes large,andbythattime the unit willlarge enough inallsenses ofnotneedingthesupportfromthe government anymore.Soaunitwillfreelyexpandnotdeterredbythefearofexitingfrombenefitswithasmallturnover.  This will increase competition, transparency and adoption of state-of-art technologies while also reduce industry’sdependencyoncrudeoilimports.  Privatization of PSUs except for their presence in defined strategic sectors- may release resources for 16deployment to priority sectors including retirement of public debt besides making them more productive and efficient.  Increase in FDI limit in defence sector from 49% to 74%, boosting private participation in power distribution in UTs and in the space sector would also work in the same direction. Easing of restrictions on utilization of theIndianAirSpacewouldenableefficientairspacemanagement.  Upgradation of Industrial Infrastructure via availability of Industrial Land/ Land Bank and Industrial InformationSystem (IIS) withGIS mapping along witha revamp ofViabilityGap Funding Scheme for social infrastructurewouldhelpattractbothdomesticandforeignprivateinvestmentsintheseareas  Power tariff policy with objectives of safeguarding consumer interests, industry promotion and sector sustainabilitywillbereleased. V.INDIA’s MACRO ECONOMIC PERFORMANCE: PRE &POSTCOVID IndexofIndustrial Production (IIP) 9. Prior to COVID-19, Index of Industrial Production (IIP) rebounded from negative growth in Q3:2019-20 to 2.2 per cent in January 2020, and 4.6 per cent in February 2020, the highest level observed since July 2019. The sharpest supply shock was witnessed in April, the month of ‘lock-down’, with IIP declining by a record 55.5 per cent in April 20202. The record contraction in April was more than three times as compared to a (-)18.3 per cent growth in March, with several firms reporting nil production. 10. While growth in industrial production in both the pre-COVID months of 2020 was concentrated only in primary and intermediate goods, post COVID de-growth was uniform across all use-based categories, demonstrating the severity of the lock-down induced supply shock(Table1). 11. Contraction in industrial output inApril 2020 can be attributed the most to basic metals, petroleum products, chemicals, motor vehicles and machinery production (Table 2). In the manufacturing sector, twelve sub-sectors contributed to approximately 40 per cent of contraction in industrial output. These are motor vehicles, furniture, machinery, electrical equipment, computers & electronics, fabricated metal products, wood, paper, leather,textiles, readymade garments, and beverages and tobacco. Sectors like motor vehicles, machinery and fabricated metal products are seen to be consistently negative contributors to industrial growth both in preand postCOVID months. 2 MoSPIdidnotreleasegrowthfigureforIIP-General,April,2020givennilproductionbyseveralrespondingindustrial unitsowingtolock-down. 17Table1: Index of Industrial Production-Sectorwise percentagecontributionto Growthbased onUse Based Category INDEXOFINDUSTRIAL PercentagecontributiontoGrowth Weights PRODUCTION (Pre-Covid) (Post-Covid) Use-basedcategory Jan-20 Feb-20 Mar-20 Apr-20 Primarygoods 34.0 27.2 57.7 -7.4 -16.2 Intermediategoods 17.2 113.7 67.1 -18.6 -20.0 Consumernon-durables 15.3 -4.6 6.0 -18.4 -11.0 Consumerdurables 12.8 -20.1 -15.7 -23.4 -22.2 Infrastructure/constructiongoods 12.3 -2.1 -0.2 -18.3 -19.9 Capitalgoods 8.2 -12.9 -14.2 -14.1 -10.4 Percentagecontributiontogrowth -23.40% 113.60% Source:CalculationsbasedonMoSPIdata. Table2: Index of Industrial Production-Sectorwise percentagecontributionto Growth basedon Use BasedCategory PercentagecontributiontoGrowth INDEXOFINDUSTRIALPRODUCTION Weights (Pre-Covid) (Post-Covid) NIC2008 Description Jan-20 Feb-20 Mar-20 Apr-20 24 basicmetals 12.80 96.9 56.0 -17.4 -17.7 19 cokeandrefinedpetroleumproducts 11.77 -1.2 14.4 -1.1 -5.8 20 chemicalsandchemicalproducts 7.87 3.1 1.3 -8.5 -7.3 10 foodproducts 5.30 -2.7 -1.4 -3.9 -2.0 21 pharmaceuticals,medicinalchemical,botanicalproducts 4.98 -2.0 5.7 -9.6 -4.3 29 motorvehicles,trailersandsemi-trailers 4.86 -19.9 -15.1 -11.4 -8.0 28 machineryandequipmentn.e.c. 4.77 0.3 -6.7 -9.2 -6.5 23 othernon-metallicmineralproducts 4.09 7.4 6.9 -5.1 -6.3 13 textiles 3.29 4.4 1.8 -2.4 -5.4 27 electricalequipment 3.00 -2.1 -0.8 -4.0 -4.1 25 fabricatedmetalproducts,exceptmachinery&equipment 2.65 -6.9 -4.7 -4.2 -3.3 22 rubberandplasticsproducts 2.42 -3.5 0.4 -2.7 -2.4 30 othertransportequipment 1.78 -7.5 -3.1 -0.9 -3.4 26 computer,electronicandopticalproducts 1.57 -0.3 -3.8 -4.5 -3.6 14 wearingapparel 1.32 -4.2 1.1 -3.8 -3.0 11 beverages 1.04 -1.4 -0.3 -1.4 -1.7 32 Othermanufacturing 0.94 -0.3 -1.1 -1.7 -1.1 17 paperandpaperproducts 0.87 -2.6 -0.4 -1.0 -0.9 12 tobaccoproducts 0.80 5.2 0.7 -0.5 -0.8 1818 Printingandreproductionofrecordedmedia 0.68 -2.0 0.4 -0.7 -0.7 15 leatherandrelatedproducts 0.50 0.6 0.8 -0.5 -0.9 wood,productsofwoodandcork,exceptfurniture;articlesof 16 strawandplaitingmaterials 0.19 0.6 0.3 -0.3 -0.3 31 furniture 0.13 0.7 0.1 -0.2 -0.3 Mining 14.37 24.9 26.6 -1.0 -6.0 Manufacturing 77.63 62.1 52.6 -95.3 -89.7 Electricity 7.99 12.5 21.5 -4.0 -4.2 OverallGrowthinIIP 100.00 2.2 4.6 -18.3 -55.4 Percentagecontributiontogrowth -95.3% 96.9% Source:CalculationsbasedonMoSPIdata. 12. Mining & quarrying activities, which account for 42.2 per cent of primary goods sector, were exempt during the lock-down, thereby entailing a relatively lower negative contribution. Falling production of capital goods and infrastructure & construction goods (20per cent contribution to de-growth) also indicated aslump ininvestment demand. 13. The ubiquity of COVID-19 supply shock was witnessed in Eight Core Industries also registering sharply negative (-) 38.1 percent growth in April 2020 as compared to 5.2 percent inApril 2019 (Figure 9).All eight industriesexperienced a broad-based decline with the sharpest contractions in cement ((-)86 per cent) and steel ((-)83.9 per cent). Contraction in eight core industries, however, moderated in May to (-)23.4 per cent with fertilizers production increasing by7.5per cent in May,2020overMay,2019. Figure8:Growth ofEightCoreIndustries (YoY) Source:MoSPI 14. Purchasing Managers Index (PMI) Manufacturing for April 2020 also recorded its 19sharpest deterioration to 27.4, spread across all components. PMI services also plunged to an all-time low of 5.4. With gradual relaxation in lock-down restrictions May onwards, PMI Manufacturing and Services moderately recovered to 30.8 and 12.6 respectively in May (Figure 10). PMI Manufacturing further improved to 47.2 in June with both output and new orders contracting at much softer rates than seen inApril and May. Contraction in industrial activity isalso expected tosimilarly decline through May and June2020as India unlocks. Figure9:PMI Manufacturing and PMI Services Source:IHSMarkit Private Consumption 15. Unlike previous recessions, the intertwined nature of COVID-19 supply and demand shocks is reflected in consumer durables sector contributing the most to March and April’s industrial decline. The production of consumer durables fell by a sharp 95.7 per cent (y-o-y) inApril 2020,after declining by36.5 per cent in March. Figure10:IIP- ConsumerDurables Source:MOSPI 2016. According to RBI's Consumer Confidence survey, consumer sentiment sank in May 2020, with the current situation index (CSI) touching historic low of 63.7 and the one year ahead future expectations index (FEI) also recording a sharp fall of 17.3 units to reach 97.9. Overall consumer spending remained afloat, mostly due to relative inelasticity in essential spending; consumers, however,reported sharp cuts in discretionary spending. Figure11:ConsumerConfidence Figure 12: Current Perceptions on Index -Current Situationand Future Spending (Index) (Essential & Non- Expectations EssentialItems) Datasource:ReserveBankofIndia(RBI) 17.With moderate easing of lock-down May onwards, some consumption indicators showed an uptick. Retail payments via digital NPCI platforms, after falling in April, increased sharply in May as compared to April, both in value terms (43.8 per cent) and volume terms (8.4 per cent). Additionally, record y-o-y declines in consumption of petroleum products in March (17.8 per cent) andApril (45.8 per cent) moderated in May with a lower 23.2 per cent y-o-y contraction. After the month of April witnessed an unprecedented zero auto sales for the first time in history, subdued consumption demand in the auto sector continued in May. Vehicle registrations also sharply declined by 88.7 per cent year-on-year in May. However, signs of uptick as per auto companies dataand vehicle registrations are visiblein June. InvestmentOutlook 18. While COVID-19’s impact on the economy is rapidly evolving, it is driving market volatility on a daily basis, as reflected in movements of volatility index of domestic equity market (VIX) and Economic policy uncertainty index (EPU) (Figure). With huge uncertainty around the pandemic stemming from the unknown, and the inability to plan for or know what’s next, such uncertainty is expected to adversely affect business climate and make firm delay their investmentplans. 21Figure13:Volatilityindex ofdomestic Figure14: Economic Policy Uncertainty equity market(VIX) Source:NSE Source:EconomicSurvey2018-19(https://www.policyuncertainty.com) Trade 19. Amid COVID-19 induced supply chain disruptions, weak external demand and persistent global trade tensions, an adverse impact on trade is expected. For highly import dependent countries like India, the overall effect on net exports may be positive on the back of relatively sharper decline in imports and lower oil prices. India’s trade deficit stood at USD 3.1 billion in May 2020, the lowest recorded trade deficit since February 2009. Compared to April 2020, trade deficit narrowed during May with exports in May improving morethan imports. Exports 20. After recording an abysmal y-o-y fall of 60.2 per cent in April 2020, India’s merchandise exports contracted by a lower 36.5 per cent in May. Iron ore, drugs and pharmaceuticals, chemicals, spices and rice were positive contributors to exports growth in May. Compared to April, major commodities which recorded a lower negative growth contribution included engineering goods, marine products, coffee, oilseeds and carpets amongst others. However, India’s top exports in terms of overall share in exports i.e. petroleum products and gems & jewellery continued to be major negative contributors from March to May. While garment industry exports have suffered in both pre and post COVID-19 scenarios, exports of electronic goods have consistently deteriorated since February, possiblyreflecting an additional tradeimpact ofan earlier Chinaoutbreak. 22Table 3: PERCENTAGE CONTRIBUTION TO EXPORT GROWTH BYPRINCIPAL COMMODITY EXPORTS %Sharein PercentagecontributiontoGrowth Sl. Exportsin (Pre-Covid) (Post-Covid) PRINCIPALCOMMODITY No. 2018-19 Jan-20 Feb-20 Mar-20 Apr-20 May-20 1 Engineeringgoods 24.2 -5.5 41.3 -34.0 -25.3 -13.3 2 Petroleumproducts 14.1 -0.9 0.3 -10.6 -14.8 -30.5 3 Gems&jewellery 12.2 -1.8 -0.9 -12.4 -18.1 -21.9 4 Drugs,pharmaceuticals&finechemicals 5.8 -0.1 0.8 -4.0 0.0 2.7 5 Readymadegarments 4.9 -17.8 -5.8 -5.3 -8.2 -9.4 6 Inorganic/organic/agrochemicals 4.8 0.0 -0.3 -4.6 -1.2 5.6 7 Electronicgoods 3.0 6.1 5.2 -2.1 -3.8 -4.7 8 Rice 2.3 -23.2 -4.4 -2.3 -0.3 0.4 9 Plastic&linoleumproducts 2.2 -2.0 2.0 -1.9 -0.2 1.0 10 Marineproducts 2.1 -2.3 -0.8 -1.2 -1.3 -0.9 11 Leather&leathermanufactures 1.6 -2.7 -2.8 -1.4 -2.0 -3.1 12 Manmadeyarnfabricsmadeups 1.5 21.9 5.6 -1.0 -2.1 -2.2 13 Spices 1.0 -6.0 -0.4 -0.9 -0.6 0.3 14 Handicraftsexcludinghandmadecarpets 0.6 33.9 15.5 -0.4 -0.8 -1.2 15 Oilmeals 0.5 4.3 -47.1 -1.2 -0.2 -0.2 16 Carpets 0.4 -51.6 21.0 -0.4 -0.6 -0.5 17 Ironore 0.4 44.6 49.7 0.8 0.2 2.1 18 Oilseeds 0.4 4.9 4.7 0.0 -0.4 -0.2 19 Tobacco 0.3 0.9 0.7 -0.2 -0.4 -0.1 20 Tea 0.3 -1.1 0.4 -0.2 -0.3 -0.2 21 Coffee 0.2 -13.1 -8.1 -0.2 -0.2 0.0 22 Cashew 0.2 -2.1 0.8 -0.1 -0.2 -0.1 23 Othercereals 0.1 -65.3 -88.3 -0.1 -0.1 -0.1 24 Jutemanufactureincludingfloor 0.1 -24.9 -15.1 0.0 -0.1 -0.2 coverings 25 GROWTHOFALLEXPORTS 100 -2.18 3.21 -34.66 -60.23 -36.17 Percentagecontributiontogrowth -88.3% 65.3% Source:CalculationsbasedonM/oCommercedata. Imports 21. India’s top five imports, namely Petroleum crude & products (POL), electronic goods, gold, pearls precious & semiprecious stones and coal were positive contributors to import growth prior to COVID-19 outbreak. After recording 59.6 per cent y-o-y decline in April, India’s imports continued to contract by 51.1 per cent in May 2020. Sharply negative contribution of imports of crude oil & petroleum products accentuated from (-)27 per cent in 23April to (-)37 per cent in May. The fall in imports came despite a rise in the average price of Indian basket of crude oil from USD 20.5 per barrel inApril to USD 29.7 per barrel in May, reflecting weak domestic demand for petroleum products. Imports of gold and electronic goods showed a similar trend of contraction continuing in May. Iron and steel and wood product imports, however, moved into positive territory in May, with consistent improvement sinceJanuary. Table 4: PERCENTAGE CONTRIBUTION TO IMPORT GROWTH BYPRINCIPAL COMMODITY IMPORTS %Share PercentagecontributiontoGrowth Sl. inImports (Pre-Covid) (Post-Covid) PRINCIPALCOMMODITY No. in2018-19 Jan-20 Feb-20 Mar-20 Apr-20 May-20 1 Petroleumcrude&products(POL) 27.4 564.9 150.2 -14.0 -27.3 -37.2 2 Electronicgoods 11.6 0.6 0.2 -11.6 -11.7 -9.0 3 Gold 6.4 -12.4 2.1 -16.4 -15.7 -19.2 Pearlsprecious&semiprecious 5.3 32.1 20.3 -12.8 -8.4 -5.3 4 stones 5 Coal,coke&briquettes 5.1 25.4 -33.1 -3.9 -4.5 -4.4 6 Transportequipment 4.1 -3.7 -2.7 3.0 -4.0 -5.0 7 Artificialresins,plasticmaterialsetc. 2.9 -176.6 -19.1 -2.9 -1.9 -1.4 8 Iron&steel 2.6 0.0 -0.1 -4.0 -1.3 0.6 9 Vegetableoils(edible) 1.9 10.5 10.3 -2.3 -0.3 -1.0 10 Chemicalmaterial&products 1.7 10.4 1.0 -1.1 -1.1 -1.2 11 Fertilisers 1.5 3.2 -2.3 -2.6 -0.3 -0.4 12 Medicinal&pharmaceuticalproducts 1.2 -24.2 -8.8 -1.1 -0.5 -0.1 13 Metaliferrousores&metalscrap 1.0 33.7 -23.0 -0.6 -0.2 -0.4 Machinetoolsincludinghandtools 0.9 -97.0 -78.7 -1.4 -1.0 -0.8 14 andcuttingtools 15 Silver 0.7 -22.2 -5.9 -0.1 -0.6 -0.2 16 Dyeingtanning&colouringmaterials 0.6 92.5 8.0 -0.7 -0.5 -0.3 17 Wood&woodproducts 0.6 -62.9 0.0 -0.9 0.2 1.1 18 Projectgoods 0.5 -234.6 -24.3 -2.0 -0.4 -0.1 19 Pulp&wastepaper 0.3 -43.0 -8.4 -0.4 -0.2 -0.1 20 Pulses 0.2 -30.6 31.4 -0.4 0.0 0.0 21 Leatherandleatherproducts 0.2 -11.0 -33.4 -0.2 -0.2 -0.2 22 Newsprint 0.2 -0.5 -1.0 -0.3 -0.1 -0.1 23 Cottonrawincludingwaste 0.1 -9.4 -1.1 -0.2 -0.1 -0.2 24 Sulphur&unroastedironpyrites 0.0 -17.6 -8.5 -0.1 -0.1 0.0 25 OverallImportsgrowth 100 -0.75 2.49 -28.71 -59.61 -52.44 PercentagecontributiontoGrowth -234.6% 564.9% Source:CalculationsbasedonM/oCommercedata. 24Inflation 22. COVID-19 induced lock-down has caused a massive supply shock that may possibly drive inflation when demand re-emerges back after the crisis. However, with phased reopening of the economy, supply and demand are expected to rise gradually. However, as seen in previous sections, the intensity of supply and demand shocks strongly varies across sectors.Such mismatches are expected to cause variations in inflation for different goods. 23.Amid supply chain constraints in agricultural markets during lock-down, consumer food and beverages inflation excluding meat and fish increased by 0.8 percentage points from March 2020 (7.82 per cent) to 8.61 per cent inApril 2020. However, it eased to 7.4 per cent in May 2020, declining both, in rural and urban areas by 94 bps and 172 bps respectively, mainly due to a high base effect. Average price level of food & beverages, measured by the CPI, at 151.3in May 2020,was almost unchanged fromApril 2020. Figure15:Consumerandwholesaleprice inflation Source:MoSPIandOfficeofEconomicAdviser,DPIIT 24. Among the food items, vegetables inflation reduced by 10.7 per cent in May as compared toApril 2020, possibly due to improving mandi arrivals and reductions in supply disruptions while sugar prices declined by 3.1 per cent. Prices of fish and meat, however, rose sharply by 21 per cent in May compared toApril. Pulses and cereals inflation continued to remain elevated at above 20 per cent (y-o-y) and 7 per cent (y-o-y) respectively, both in April and May. Daily retail prices data of 22 essential commodities for 1st to 26th June 2020 suggested moderation in retail prices of these commodities as compared to May 2020 with onion, wheat, pulses, sugar, soya oil and sugar prices witnessing declines. Tomato, however, has shown 16per cent rise in retail price in Juneas compared toMay 2020. 2525. On the other hand, weak demand pressures were reaffirmed with CPI inflation in fuel & light group softening to 1.4 per cent in May 2020 from 2.9 per cent in April 2020. Inflation in housing also moderated to 3.7 per cent in May from 3.9 per cent in the preceding month. However, inflation in health services rose to 4.3 per cent from 2.8 per cent inApril 2020, as expected under thehealth shock. 26. COVID-19 induced demand shocks drove Wholesale Price Inflation (WPI) to negative territory in May 2020, from 1 per cent in March 2020 with sharpest y-o-y declines seen in crude petroleum and natural gas ((-)46 per cent), mineral oils ((-)37 per cent), basic metals ((-)5.8 per cent), chemicals((-)3.9 per cent) and textiles((-)2.7 per cent). Deflation in basic metals and petroleum & natural gas has been widening since February, showing the global impact of COVID-19 since its outbreak in China, a major global metals and energy consumer. Similarly, textiles sector has also witnessed persistent deflation since January 2020, partly corroborated by its subdued export performance in these months, as explained in the previous section. WPI inflation in motor vehicles, trailers and semi-trailers, though positive (1.8 per cent) in May 2020, has also declined since its January level of 2.4 per cent, while its production stays persistently weak in these months, reflecting the interlinkages of COVID-19 induced demand and supply shocks. 27. Amid gradual easing of global lock-downs, there has been some recovery in global oil prices (43 per cent), industrial raw materials (4.2 per cent) and base metals (5.6 per cent) in May 2020 as compared to April, after a sharp supply driven slump drove them to unprecedented lows in the previous months. With global prices recovering mid-May onwards, Indian Oil Corporation has hiked liquified petroleum gas (LPG) cylinder rates by Rs. 37 in metro cities beginning June after three consecutive months of cuts. Petrol and diesel rates have also witnessed consecutive rises across metro cities in June, driven by base price hikes by oil companies and excise duties raised by governments. While there has been moderate recovery in fuel prices, the overall inflation outlook continues to remains benign notwithstanding the supply shocks acting on food inflation. Future inflation trajectory will depend on the recovery rate from COVID-19 and the easing of associated supply and demand shocks. Fiscal situation 28. COVID-19 has also impacted government fiscal revenues via its detrimental impact on both the income and production side of national accounts. As per provisional accounts (PA) data of central government finances for 2019-20, the fiscal deficit for 2019-20 PA stood at 26Rs 9.4 lakh crore which is 4.6 per cent of GDP, 0.8 percentage points higher than the Revised Estimates.This isattributable mainly toshortfall in revenue collection. 29. Net Tax receipts for 2019-20 PA stood at Rs. 13.56 lakh crore, 9.9 per cent lower than the amount envisaged in RE. The shortfall in direct tax collection contributed to 75 per cent of the shortfall in non-debt receipts. The shortfall in indirect taxes was of the tune of 0.14 per cent of GDP,which was largely led by shortfall in customs and GSTcollections (Centre). The fall in direct taxes collection in 2019-20 is on expected lines due to the tax reforms undertaken and higher refunds issued during FY 2019-20. Non-tax revenue also registered a shortfall of Rs. 19300 crore in 2019-20 (PA) relative to RE, largely led by shortfall in dividends. On the expenditure side, the revenue expenditure was maintained at the RE level butthe capital expenditureregistered a cut byRs.12000crore. 30. The interruption in economic activity due to COVID-19 has led to shortfall in revenue collection during the first two months of the FY 2020-21. Fiscal deficit stood at Rs 4.7 lakh crore till May 2020, which is 58.6 per cent of BE compared to 52.0 per cent during May 2019. Revenue Receipts registered a negative growth of 68.9 per cent, led by negative growth in Personal Income Tax, all indirect taxes and non tax revenue. Corporation tax registered a massive growth of 1408.1 per cent over May 2019 and stood at 2.5 per cent of BE. Personal Income Tax stood at 5.6 per cent of BE compared to 10.6 per cent till May 2019. Non-Tax revenue upto May 2020 turned out to be less than 62 per cent of the level till May 2019. On the expenditure side, the capital expenditure increased by 15.7 per cent relative to May last year, whereas revenue expenditure fell by 1.9 per cent over May 2019 and stood at 17.4per cent ofBE. Figure16:CumulativeCentre'sFiscal Deficit Source:ControllerGeneralofAccounts 2731. In so far as actual borrowings in FY 2020-21 are concerned, Centre's gross market borrowings upto 19th June, 2020 stood at Rs. 2,82,000 crore, 51 per cent higher than corresponding last year levels. Net borrowings were 12.3 per cent higher than last year levels. States continued to be active borrowers in May and June 2020, raising more than 2 timesboth ongross and net basis compared to last year as on19thJune, 2020. 32. Yet, surplus liquidity in the banking system resulted in 10-year G-Sec market yields falling by 83 bps during May 2020. G-Sec yield as on 26th June stood at 5.93 per cent. With continuous selling in G-Secs by FPIs post emergence of COVID, general category FPI utilisation of investment limit in Central G-Secs has fallen to 39.7 per cent as on 26th June, 2020,compared to thepeaks ofover75per cent at thebeginning of 2020. Agriculture 33. Agriculture and allied activities activities’ contribution to growth may be significant on the back of an increase of 3.7 per cent in foodgrains production to a new record (as per the third advance estimates of the Ministry of Agriculture released on May 15, 2020). Procurement of wheat from farmers by Government agencies has touched an all-time record figure of 388.3 Lakh Metric Tonnes (LMT) on 30th June, 2020 surpassing the earlier record of 381.48 LMT achieved during 2012-13. This has been accomplished during the trying times of Covid-19 pandemic under social distancing restrictions. 42 Lakh farmers have been benefitted with total amount of about Rs. 73,500 crore having been paid to them towards Minimum Support Price (MSP) for wheat. This would help alleviate rural distress at this timearising dueto reversemigration ofpeople from cities amid thepandemic. 34. With the forecast of a normal monsoon at 102 per cent of Long period Average (LPA), agriculture is set to cushion the shock of the Covid pandemic on the Indian economy in 2020-21. The progress of the monsoon during the month of June, 2020 has been very encouraging and the south-west monsoon has covered whole of India as on 26th June, 2020 – way ahead of the scheduled first week of July. As on 26th June, 2020 up to which latest information is available, kharif sowing was higher by 104.3 per cent over last year’s acreage with a big jump in area coverage under Oil seeds, Pulses, Cotton and Coarse Cereals. The procurement of Minor Forest Produces (MFP) under the MSP for MFP Scheme in 16 states has hit a record-breaking high with the procurement touching Rs. 79.42 crore. This has proved to be a much needed panacea in these distressing times of Covid-19 pandemic, which has disrupted lives and livelihoods of tribals. Fertilizer sales have surged by almost 98 per cent year-on-year inMay 2020reflecting a robust agricultural sector. 28VI. GROWTH OUTLOOK 35. India’s real GDPgrowth rate was 4.2 per cent in 2019-20 as per the provisional estimates released by the National Statistical Office, compared to 6.1 per cent recorded in previous year. Nominal GDP for the year is estimated at Rs. 203.4 lakh crore, lower as compared to the Budget Estimates. This may be attributed to lower growth in Q4 of 2019-20 due to the global spread of COVID-19 since January 2020 and subsequent lock-down measures across countries including India. Real GDP growth rate in Q4 of 2019-20 was at 3.1 per cent, a 2.6 percentage point drop from growth rate in 2018-19. Overall inflation as measured by the GDP deflator for 2019-20 works out at 2.9 per cent, lower than 4.6 per cent in 2018-19. Growth of real Gross ValueAdded (GVA) at basic prices was at 3.9 per cent in 2019-20, as compared to 6.0 per cent in 2018-19. Real GVA growth has declined in almost all sectors except Agriculture & Allied; Mining & quarrying; and Public administration, defence and otherservices in 2019-20. Table5:India’s GDPgrowth estimates (percent) 2017-18 2018-19 2019-20 2ndRE 1st RE PE Real 7.0 6.1 4.2 Nominal 11.1 11.0 7.2 RE:RevisedEstimates,PE:ProvisionalEstimates 36. Given the immense uncertainty associated with infection and macroeconomic recession curves of countries across the world, IMF, in its World Economic Outlook (June 2020) report, has downward revised global growth to (–) 4.9 per cent in 2020, 1.9 percentage points lower than its April 2020 forecast. All regions across the world are projected to experience negative growth in 2020, the first time in history. While advanced economies are projected to contract by 8 per cent in 2020, 1.9 percentage points lower than the April forecast, growth in emerging market and developing economies has been forecast at -3.0 per cent, a downward revision of 2 percentage points. In line with downward revision of global growth, India’s growth has been forecast at (-) 4.5 per cent in 2020, a 6.4 percentage point downward revision compared to theApril 2020forecast. 29Figure17:Real GDPgrowth acrosscountries andcountry groups Projections Source:WEO,April2020databaseandJune2020Update VII. GREEN SHOOTS OF ECONOMIC REVIVAL IN SELECT REAL ACTIVITY INDICATORS 37. Early green shoots of economic revival have emerged in May and June with real activity indicators like electricity and fuel consumption, inter and intra-state movement of goods, retail financial transactions witnessing pick up. Electricity consumption saw lower contraction in growth rates from (-) 24 per cent in April to (-) 15.2 per cent in May to (-)11.3 per cent in June (till 28th June). In June, electricity consumption has continuously improved with year on year contraction declining from from (-)15.6 per cent in the first half of June to (-)7percent in thesecond halfofJune (as on28thJune). 38. Total assessable value of E-Way bills picked up by a massive 130 per cent in May 2020 (Rs. 8.98 lakh crore) compared to April 2020 (Rs. 3.9 lakh crore), though lower than previous year and pre-lock-down levels. Value of E-Way bills generated between 1st and 28th Junestood at Rs.11.4lakh crore. 30Figure 18:Powerconsumption Figure 19: Total assessable value of E-Way bills Source:POSOCO Source:GSTN 39. Consumption of petroleum products, a major indicator reflecting consumption and manufacturing activity in the country increased by 47 per cent from 99.37 lakh metric tonnes in April to 146.46 lakh metric tonnes in May. Consequently, year-on-year contraction in consumption growth of petroleum products was much smaller at (-)23.2 per cent in May as against (-)45.7 per cent in April. In June, growth in consumption of petroleum products is expected tobestillhigher after onemonth ofUnlock 1.0. 40. Railway freight traffic improved by 26 per cent in May (8.26 crore tonnes) over April (6.54 crore tonnes), though still lower than previous year levels. The improvement is likely tocontinue in Junein sync with growth inmovement ofgoods onNational Highways. Figure20:Consumptionofpetroleumproducts Figure 21: Revenue Earning Freight TrafficofMajorCommodities Source:PPAC Source:M/oRailways 3141. Average daily electronic toll collections increased from Rs. 8.25 crore in April, 2020 to Rs. 36.84 crore in May, rising more than 4 times. In the first four weeks of June, it has improved further to Rs. 50.9 crore. Total digital Retail financial transactions via NPCI platforms increased sharply from Rs. 6.71 lakh crore inApril, 2020 to Rs. 9.65 lakh crore in May.Thetrend is expected tocontinue in Junedriven byasustained pick-up inreal activity. Figure23:Averagedailyelectronictollcollection Figure 24: Retail financial transactions through NPCI Source:NHAI Source:NPCI 42. The commitment of the Government towards both structural reforms and supportive social welfare measures will help build on these ‘green shoots’. The resolve for ‘Atmanirbhar Bharat’ will be strengthened with the collective effort of all stakeholders and contributetorebuilding astrong vibrant Indian economy. *** 32Annexure Active,Deaths,Recoveredcasesincountrieswith150000+confirmedcasesandChina&South KoreaasofJune24,2020 3334Source:2019NovelCoronavirusCOVID-19DatarepositorybyJohnHopkinsCSSE Foranyqueries,youmaycontacttheteam: 1. ShriRajivMishra,EconomicAdviser(E-mail:r.mishra67@gov.in) 2. Ms.SurbhiJain,Director(E-mail:surbhi.jain@nic.in) 3. Ms.TulsipriyaRajkumari,DeputyDirector(E-mail:tulsipriya.rk@nic.in) 4. Ms.SanjanaKadyan,AssistantDirector(E-mail:sanjana.kadyan@gov.in) 5. Ms.SonaliChowdhry,Consultant(E-mail:sonali.chowdhry@nic.in) 6. ShriPradyutKumarPyne,EconomicOfficer(E-mail:pradyut.pyne@nic.in) 7. ShriNarendraJena,EconomicOfficer(E-mail:jena.narendra@nic.in) 35