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Pent-up demand behind improved economic activity, likely to not sustain: Icra
Nov-25-2020

Domestic ratings agency Icra has said the pick up in economic activity in October is the result of pent-up demand and may not sustain going ahead. Multiple fast-paced indicators, including GST collections, have been showing a sharp recovery since October, which has also led many analysts to revise their overall GDP forecasts for the fiscal.

The agency's Principal Economist Aditi Nayar said ‘we caution that the spikes in production seen in the various sectors in October 2020, are an exaggeration of the true recovery on the ground, as they have been driven by a large component of pent-up demand that may not sustain after the festive period is over.’

She added the factors which remain to be watched are the pace of government spending in the second half of the fiscal, after the unexpected contraction recorded in the September quarter. Besides, she warned that the potential re-imposition of restrictions in one or more states on account of a fresh surge in CVID-19 infections, may temper the momentum of recovery in the coming months.

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