Will soothing words hide our pain?

India's economic activity is gathering momentum, the Reserve Bank (RBI) said yesterday, reported Business Today. "All engines of aggregate demand are starting to fire; only private investment is missing in action and the time is apposite for it to come alive." Doesn't make sense. If demand is increasing according to the RBI, some 120 companies reported more than 100% rise in their profits in the December quarter and the RBI is holding borrowing costs at record low rate of 4%, then why are businesses so reluctant to invest? "The RBI expects the Indian economy to grow by 10.5 percent in the financial year 2021-22." Udit Misra analysed the First Advance Estimates (FAE) for the current financial year ending on 31 March, released by the Ministry of Statistics and Programme Implementation. It said that the GDP will contract by 7.7% this year, per capita GDP will fall below 2016-17 level, per capita private final consumption expenditure (PFCE) will fall below 2017-18 level and gross fixed capital formation (GFCF), which indicates private investment, will fall even below 2016-17. Unemployment level was rising "even with India's growing economy, albeit at a decelerating pace, before the Covid crisis" and has risen over the last 12 months "then the total number of unemployed people must be around 40-45 million", wrote Misra. "It must also be kept in mind that each unemployed person is part of a larger family -- implying millions of families suffering from the lack of employment opportunities." "A Mint assessment of nearly 2,500 listed companies has revealed that their net profit in the third quarter of 2020-21 (October to December) expanded by 72%, year-on-year," wrote an editorial in the Mint. How? "As the virus raged, businesses rushed to retrench staff, slash salaries, shave office expenses and enhance operational efficiency, among other things." Coronavirus infections have increased in parts of the country again. "Maharashtra and Kerala appear to be witnessing a second wave of the virus with experts expressing apprehension that a similar rise is bound to happen in other parts of the country as well," reported the Times of India. "An international comparison of growth rates shows that India will be among the worst affected economies by Covid-19, suffering the 8th largest contraction among the 30 countries for which IMF's World Economic Outlook has given GDP growth rates," wrote Roshan Kishore. "The RBI is projecting inflation at 5% or a little north  of 5% till September. Net-net, the RBI is calling for much lower inflation in 2021 than in 2020," wrote Joydeep Sen. This is because of lower food prices and base effect. Food prices maybe low for now but prices of other goods and services are rising because of rising fuel costs. The RBI is trying to be soothing. How long can it hide the pain?