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Formal sector gained market share during Covid
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SME Times News Bureau | 12 Nov, 2021
The formal sector appears to have gained market share during the
Covid-19 pandemic, while the unorganised/informal economy has suffered
and which is not adequately captured in the GDP numbers currently,
foreign brokerage UBS said.
The effects of the pandemic have
adversely affected the employment and income levels of the workers in
the informal sector largely in the non-agriculture sector in rural areas
and high contact services sector in urban areas, the report said.
"We
expect real GDP growth to remain well above trend at 7.7 per cent YoY
in FY23E before settling at the long-run average of 6 per cent in FY24E.
Even though India should remain one of the fastest growing EM in FY23E
(on a strong statistical carry over), the output gap may continue to be
negative throughout. On balance, we remain more optimistic than
consensus (7.4 per cent YoY) about a FY23 recovery," the report said.
While
consumption growth could moderate, measures to boost public capex and
early signs of a recovery in the residential real estate sector may
offset some of the adverse impact. Goods exports could moderate as the
expected shift from goods to service consumption at a global level as
the pandemic recedes should weigh on global trade.
"We also flag a
potential credit accelerator effect in India aiding the recovery. Our
baseline assumption is that activity continues to normalise and
remaining mobility restrictions are gradually removed," UBS said.
We
expect near-term household consumption to continue to benefit from
unwinding of forced/precautionary savings accumulated during the Covid
crisis. UBS Evidence Lab's India Savings & Investment Online
Consumer Survey of 1,000 urban Indians indicated improvement over the
previous survey in November 2020. Among respondents, 55 per cent saw
savings increase vs. last year. Notably, over half of respondents saved
as precautionary measure; a sizeable number feel higher income led to
higher savings.
Consumption Outlook Consumer Survey of 1,500
consumers indicated affluent Indians' income during the pandemic was
relatively unchanged and could support near-term pent-up demand. Nearly
two thirds of respondents anticipate income to increase in 2022 as
affluent consumers are spending again).
"We think optimism about
income growth and a better financial situation is a key metric to track
regarding a swift normalisation of consumption trends. We expect
improving demand-side indicators (vehicles, property, home &
personal care, consumer durables, etc). Notably, the top 20 per cent of
the Indian population account for the bulk of discretionary consumption
(59 per cent of discretionary consumption in rural areas and 66 per cent
in urban areas)," the report said.
However, we will closely
monitor recent supply-side disruptions, including high global commodity
prices (especially oil) as these may weigh on India's fragile economic
recovery.
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Customs Exchange Rates |
Currency |
Import |
Export |
US Dollar
|
66.20
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64.50 |
UK Pound
|
87.50
|
84.65 |
Euro
|
78.25
|
75.65 |
Japanese
Yen |
58.85 |
56.85 |
As on 13 Aug, 2022 |
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