On Wednesday, the finance ministry said rapid vaccination and front-loading of the fiscal measures planned in the FY22 Budget hold the key to invigorating the investment, and thereby consumption, cycle in the coming quarters.
In its latest monthly report on the economy, the department of economic affairs said, as witnessed in the March quarter, where “growth in capex generated positive spill-overs for consumption, including in the contact-sensitive sectors, these steps would facilitate recovery post the second wave”.
MThe report said that manufacturing and construction are expected to experience a softer economic shock in the current quarter, with localised lockdown curbs in states being more adaptive to learnings from the first Covid wave; the prospects for agriculture sector continue to remain robust amid the expectation of a normal monsoon. “Quickening the pace and coverage of vaccination is critical to help India heal and regain the momentum of economic recovery,” it added.
Vaccinating to achieve herd immunity (75-80% of the population) will boost consumer and producer confidence and reinvigorate the engines of economic growth. So, it added that challenges relating to vaccine supply, vaccine hesitancy, operational aspects to achieve high daily throughput, and widespread reach must be anticipated and planned for in advance. The country is alreadys undertaking the world’s largest vaccination drive, with 23.9 crore doses administered asofn date.
Having witnessed a drop during the peak of the second wave, specific high-frequency indicators such as power consumption, E-way bills and foreign portfolio investment flows seen an uptick in the second half of May 2021.