India's economy is seeing a strong recovery taking root, Finance Minister Nirmala Sitharaman said on Thursday while announcing a third round of fiscal stimulus to help stressed sectors battling the Covid-19 pandemic.
Latest measures included additional funding for real estate developers and contractors, fertiliser subsidies, a new employment scheme and additional spending on the rural jobs scheme among other initiatives.
The government will spend 1.2 trillion rupees ($16.1 billion) on the latest stimulus program in addition to the 1.45 trillion rupees announced on Wednesday, taking the total stimulus announced so far including that by the central bank to 15% of gross domestic product, Sitharaman said.
India is planning to announce a fresh round of stimulus amounting to about $20 billion this week to help pull the economy out of its historic contraction, government officials told Reuters on Wednesday.
"We expect that the announcement will help generate jobs, oil the engine of the economy," said Naveen Kulkarni, chief investment officer at Axis Securities.
The recovery is due not only to pent-up demand, Sitharaman told a news conference.
He said an increase in tax collections for goods and services, higher energy consumption, a rise in the purchasing managers' index, improved bank credit and a stock market surge all suggested that stimulus measures taken so far had begun to help the economy bounce back.
The Indian economy, which the International Monetary Fund singled out as a global bright spot only a few years ago, was the worst performing major economy worldwide in the April-June period, contracting 23.9% amid a stringent lockdown to curb the spread of the pandemic.
The economy is expected to contract close to 10% in the fiscal year to March 2021. But Sitharaman noted that the Reserve Bank of India had predicted a strong likelihood that the economy may begin to show growth in the ongoing fiscal third-quarter.
He said the government is also launching a scheme to incentivise the creation of new jobs in a bid to fuel a rebound.
Despite Sitharaman's buoyant tone, markets initially weakened before recovering some ground following the announcement of additional job creation.
The NSE Nifty 50 index was down 0.4%, while the S&P BSE Sensex fell 0.5% by 0950 GMT. The indexes had earlier dropped nearly 1%.