The Finance Ministry on Thursday said that economic recovery, which was impacted during the second wave, will see faster revival in the next three quarters of the current financial year, even if the third wave hits the country. It said that this confidence is mainly due to a rapid surge in the inoculation drive and a rebound in leading macroeconomic indicators.
“Rapidly increasing vaccination coverage and richer experience with pandemic management provide the confidence that the recovery can continue even in the event of a third wave,” the finance ministry’s Department of Economic Affairs said in its monthly review for August.
It added that India is poised for an even faster recovery in the next three quarters of 2021-22 due to measures taken by the Central government and the Reserve Bank of India.
The ministry noted that the momentum of India’s economic recovery since the second half of last fiscal (FY21) was indeed disrupted by the second wave. However, the rapid surge in vaccination in Q4 of 2020-21 and in the first quarter of the current fiscal contained the sequential decline in output.
Vaccination coverage now stands at more than 60 per cent of the adult population as on 8 September.
As on date, cumulative vaccination doses administered stood at 70.75 crore doses with 54.1 crore people (almost 62.5 per cent of adult population) having received at least one dose of vaccination of which 16.7 crore (19.3 per cent of adult population) got two doses.
However, the looming fear around Delta variant of Covid-19 has once again cast a shadow necessitating sustained precautions with greater focus on testing, tracking and adopting appropriate behaviour.
The report said that Kerala remain a concerns as it accounting for around 60 per cent of daily new cases in the country and reporting the highest daily deaths across all states.
While experts have cautioned against a potential third wave in the oncoming festive months, pandemic control and management needs to be strengthened with Maharashtra and Kerala presently accounting for 70 per cent of the active cases in the country, ministry report said.
On growth numbers, the report said that provisional GDP estimates, for first quarter of the FY22, reaffirm India’s resilient V-shaped recovery despite a more brutal second wave.
Having posted a near 180 degree turnaround from a sharp contraction in Q1FY21, to recover more than 90 per cent of the pre-pandemic Q1 output of 2019-20, the V-shaped economic recovery remains intact, it highlighted.
The report explained that the asynchronous onset of the second wave across states and its greater intensity necessitated localised lockdowns and mobility restrictions resulting in sequential slackening of economic activity in the first quarter of FY 2021-22.
And it is also reflected in eight core industrial output, PMI manufacturing, steel consumption, auto sales, tractor sales, petroleum products consumption, port and air traffic, PMI services, highway toll collections, GST collections and UPI transactions.
Consequently, as per the latest NSO estimates, real output of Q1 2021-22 declined by 16.9 per cent over the preceding quarter. This decline would have been more but for the rapid surge in vaccination coverage from 4.7 per cent of the total population in Q4 of 2020-21 to 24.5 per cent in Q1 of 2021-22, it said.
While construction rebounded sharply to recover 85.1 per cent of corresponding 2019-20 level, the most impacted contact intensive services sector showed gradual revival to reach 70 per cent of its pre-pandemic levels.
Recovery in key drivers of economic growth at 88.1 per cent for private consumption and 82.9 per cent for investment augur well for faster revival of demand and growth.
The government’s policy thrust on quickening virtuous cycle of growth via capex and infrastructure spending has increased capital formation in the economy lifting the investment to GDP ratio to about 32 per cent in Q4FY21 despite the second wave disruptions, the report noted.