Economy

Economy treading cautiously, optimistic on pent-up demand: Assocham

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BENGALURU: The Indian economy, after a tough first quarter, is witnessing a revival in demand on the back of strong activity in construction-related business, consumer durables such as air-conditioners, refrigerators, among other, said Associated Chambers of Commerce and Industry of India (ASSOCHAM India) in a statement.

Domestic travel and tourism is also seeing pent-up demand emerge, it said.

”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,” said Deepak Sood, secretary general, Assocham India.

“While we remain as anxious as all right-thinking citizens about visible lapses in the covid appropriate behaviour, some of popular travel destinations for summer months are witnessing a rush of tourists,” said Sood.

The report suggests that construction activities which were suspended during April have resumed, with road building, repairs and maintenance and residential projects showing an uptick.

”Average city dwellers, especially in the upper middle class and affluent segments have taken up their pending construction and repair or upgradation 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,” the Assocham statement said.

Despite increase in fuel prices, use of private vehicles over public transport is adding fuel consumption, but automobile production and sale remains constrained by external issues such as a global shortage 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.

According to Assocham, migrant workers have been returning to cities and industrial hubs.

”What gives us 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.

He added that 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,” said Sood.

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