Finmin economy report: Faster jabs and upfront fiscal steps, key to recovery

Our Bureau New Delhi | Updated on June 10, 2021

Softer shock seen on manufacturing, construction sectors

Quickening the pace and coverage of vaccination is critical to help India heal and get the momentum back in the economy, a Finance Ministry report said on Wednesday. However, it said that manufacturing and construction sectors will experience ‘a softer economic shock’ in the ongoing quarter (April-June).

“As we cautiously recuperate from the second wave, rapid vaccination and frontloading of the fiscal measures planned in the Budget hold the key to invigorating the investment, and thereby consumption, cycle in the coming quarters,” the monthly report of the Economic Affairs Department said.

The report listed elements key to maintaining the delicate balance of life and livelihoods. These include continued vigilance on pandemic preparedness, upscaling health spending and health infrastructure, faster roll-out of vaccines and vaccination, investing in research and development to be prepared for mutants of the virus, prudent and pre-emptive restrictions, and strict observance of Covid-appropriate behaviour. Highlighting the fact that economic activity is inextricably linked to the path of the pandemic, the report said the intensity of the second wave could not be predicted by epidemiologists, which suggests that it is difficult to plot the trajectory of Covid-19 in the subsequent part of the year. However, it reiterated the hope that the impact of the second wave would not be very severe on the economy. It also noted the forecast of a good monsoon bodes well for the agricultural sector gathering momenutum.

“Concomitantly, high frequency indicators in real and financial sectors like power consumption, E-way bills and foreign portfolio investment (FPI) flows witnessed a slight uptick in the second half of May 2021 after enduring the second wave driven contraction during April and first half of May,” the report said.

“With State-level lockdown restrictions being more adaptive to learnings from the first wave, manufacturing and construction activities are expected to experience a softer economic shock in the current quarter. However, the speed and scale of the second wave has created some downside risk as the economy was still recovering from last year’s supply and demand shocks,” it said.

Published on June 09, 2021

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