For some part, the year 2021 was like its predecessor — easily one of the worst years in India’s history — unfolded in ways eerily similar. However, in some parts, it displayed such swings that it could easily have been diagnosed as one with a split personality.

Like the previous year, events in 2021 also transpired in a similar fashion, with the first half seeing a hit due to Covid-19 and the second half of the calendar witnessing steady recovery. While the year started off on an optimistic note, the country was unexpectedly hit by a second wave of infections starting March. This wave, though shorter, was much deadlier than the first.

While the first wave largely affected urban India, the second wave hit the hinterland.

Fortunately, the hit to economic activity owing to the second wave of infections was limited to Q2, thanks to the less stringent restrictions imposed by the States (unlike the first wave, when India imposed the world’s strictest lockdown). Recovery gained steam, thereafter, aided by reopening across States and a ramp up in the pace of vaccination.

In 2021, the focus shifted to the pace of vaccination as against the availability of vaccines (which was the primary concern in 2020). India’s vaccination program had started out quite slowly. However, from an average 1.7 million jabs per day during February-May period, the government ramped up the pace to 4.2 million per day during June-July 2021 and further to 7million per day during August-September 2021.

This unexpected increase in the pace of vaccination bolstered economic recovery. Consequently, India managed to administer 1.29 billion doses by early December, with 89.2 per cent adults receiving the first dose and 54 per cent of adults being fully vaccinated. At the current pace, the country is likely to fully vaccinate all adults by March 2022.

Urban vs rural India

Rural India had fared much better than urban India in 2020. Rural consumer sentiments continued to rule higher than urban consumer sentiments through 2021 (even as both remained in the negative zone). Agriculture, the lone bright star in FY21, continued to do well, growing 4.5per cent in the June and September quarters – buoying up rural economic activity. Contact-intensive services, concentrated in urban India, have lagged in the recovery. Nevertheless, with the ongoing pace of vaccination, this segment is set to witness a strong recovery in the near term.

The Centre witnessed a massive swing in its fiscal fortunes in 2021. It has seen an unexpected surge in tax collections so far in FY22. Direct tax collections have surged by 70.9 per cent YoY during April-October 2021. Besides, while duty hikes on petrol and diesel (last year) have continued to support excise collections, customs duty collections have rebounded sharply in line with the surge in India’s foreign trade. GST collections have also risen sharply with the recovery in the economy.

The surge in tax collections has led to expectations of a surplus of ₹1.5-2 trillion vis-à-vis budgeted gross tax revenues for FY22. This has provided comfort vis-à-vis the government’s fiscal targets for the year.

The post-Covid world unexpectedly witnessed an equity market boom, that has continued into 2021. However, the primary markets saw unprecedented action in 2021 – with as many as 57 listings raising a record ₹1.1 trillion.

As per a PWC report, Indian start-ups raised $24.2 billion during the first three quarters of 2021 — substantially higher than the $10.8 billion raised during 2020. Finally, as many as 40 new age companies became unicorns in 2021 (as against 11 in 2020).

Efforts must focus on building sustainable economies and businesses that can withstand setbacks. It remains to be seen how the emergence of Omicron shapes our outlook for FY22. But for now, 2021 fared better than 2020 on several counts and the improvement though not colossal, gives hope for 2022!

The writer is Group Chief Economist, M&M. Views expressed are personal

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