State Bank of India’s Economic Research Department said its real GDP growth forecast of 10.4 per cent for FY22 looks a bit ambitious given the rise in Covid-19 cases and restriction now imposed in every state.

SBI’s ERD had revised its real GDP growth forecast downwards from 11 per cent to 10.4 per cent in FY22 on April 23, 2021, due to the Covid-19 pandemic related to partial/local/weekend lockdown in almost all States.

In its report “Ecowrap”, the ERD observed that with the second wave and associated lockdown/ restrictions, economic disruption is now clearly visible. At least 20 states are now in lockdown, it added.

The report said the number of rating downgrades are 3.7 times higher than upgrades in April 2021.

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“Our Business Activity Index which has been declining steeply since April, has dipped to a new low level of 71.7, the level attained in mid-August 2020.

“The latest week shows dip in all indicators, except for weekly food arrival and electricity consumption,” said Soumya Kanti Ghosh, Group Chief Economic Adviser, SBI.

He observed that the decline in labour participation is a matter of concern, indicating that the disruption has percolated the labour market as well.

Even the monthly leading indicators, including GST e-way bills, vehicle sales, fertiliser sales, have declined fromApril 2021 vis-a-vis to March 2021.

Prioritise single-dose vaccines

Whether the pent demand would support economic activity once the restrictions are removed, the Department believes the recovery will depend on people/s psyche to come out, and which will not happen until the larger population is vaccinated.

“We thus again re-emphasise the power of vaccination as a primary tool to reduce the severity of infections.

“We must vaccinate our people on a mission mode, even if it means suspending economic activity for a while after the second wave subsides and get all vaccinated. Also, single dose vaccines should be prioritised,” said Ghosh.

Vaccination drive

Coming to the vaccination drive, the report said so far India has given 16.05 crore doses of vaccine -- around 13.1 crore have taken the first dose, and 3.15 crore fully vaccinated, taking both doses. The percentage of people who have taken double dose to total vaccination doses is now around 19.5 per cent.

“However, the daily vaccine doses given is now at an average of 17 lakhs per day compared to average of 28 lakhs per day in April.

“Given this trend, we believe India can only be able to vaccinate 15 per cent of population by October 2021 (which is required for herd immunity given the other countries’ trend) but only if we are able to vaccinate around 55 lakhs daily in September & October,” Ghosh said.

As per ERD, a disaggregated data analysis show that Maharashtra, Uttar Pradesh, Delhi and Chhattisgarh might have received lower vaccine doses than they require, whereas states like Rajasthan, Kerala, West Bengal and Gujarat have received more.

“Thus such states with a lower share have to procure large number of vaccines in future from the manufacturers to fill the gap.

“However, we also need to understand that there will be always a gap in ex-ante and ex-post vaccine distribution given the spread of Covid has been almost difficult to predict,” opined Ghosh.

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