Finance Ministry flags prospects of a second COVID-19 wave as ‘downside risk’
India’s economic system is firmly on the path of a V-shaped restoration after the collapse in the first quarter, and additional enchancment is predicted in the third quarter, ‘notwithstanding some moderation’ in November’s indicators, the Ministry of Finance stated on Thursday, attributing the restoration to the unlocking course of together with ‘astute’ stimulus measures.
The prospects of a second wave of COVID-19 infections, nevertheless, stays the key draw back danger to the economic system, with ‘Gujarat, Madhya Pradesh, Rajasthan, Uttar Pradesh and Delhi probably facing their second and third waves’ in November, the ministry stated.
“However, there is a growing cautious optimism that the steep plunges of April-June quarter may not resurface with significant progress in vaccines and contact intensive sectors increasingly adapting to a virtual normal,” the ministry stated in a month-to-month financial report. “The prospects of a vaccine are encouraging but we need to remain on guard till it is approved and permeates to a large section of the population,” it added, urging individuals to observe COVID-appropriate behaviour and keep security protocols earnestly.
Arguing that inflation, which had risen to 7.61% in October, could have peaked, the Department of Economic Affairs in the ministry stated shopper worth inflation was prone to ‘decelerate gradually’ as base results would kick in, and meals inflation was anticipated to chill because of a good kharif harvest.
Agriculture, which has grown constantly at 3.4% by way of the first half of 2020-21, is predicted to stay the economic system’s vibrant spot with rabi crop sowing displaying a wholesome rise by the finish of November, the division famous in its report. By November 27, total rabi crop acreage was 4.02% greater, with the space underneath pulses growing 43.3%, the ministry identified.
However, misery in the rural labour pressure appears to have worsened. “The demand for jobs under the Mahatma Gandhi National Rural Employment Guarantee scheme (MGNREGS) has surged, with a y-o-y growth of 47.2% in November. Till November, 266.67 crore person days have been created under the scheme — a jump of 51.3% as compared to previous year,” the ministry famous.
“This proves that the scheme has been effective in alleviating rural distress in the pandemic period especially to the migrants who returned to their villages. The additional allocation of ₹10,000 crore in the latest package for Pradhan Mantri Garib Kalyan Rozgar Yojana would further give a boost to job creation in the rural sector and supplement rural incomes,” it added.
“This V-shaped recovery, evident at the half-way stage of 2020-21, reflects the resilience and robustness of the Indian economy. The fundamentals of the economy remain strong as gradual scaling back of lockdowns, along with the astute support of Atmanirbhar Bharat Mission has placed the economy firmly on the path of recovery,” the ministry stated, referring to the 7.5% contraction recorded in the second quarter following the 23.9% decline recorded at the peak of the ‘stringent’ lockdown in the first quarter.
“The sustained improvement in high frequency indicators in October and November ignite optimism of an improved performance in Q3,” the DEA stated, including that latest fiscal help measures would assist revive the economic system quicker.
“The timely announcement of the third tranche of the Atmanirbhar Bharat package on the eve of Diwali with a multi-sector focus across the labour market, stressed sectors, social welfare, manufacturing, housing, infrastructure, exports and agriculture, is also a significant step towards faster revival of the economy, restoration of lost jobs and creation of new ones,” the ministry stated.
“Moving deeper into Q3, there is a cautious optimism that global economic uncertainty does not mirror itself in India notwithstanding moderation of a few high frequency indicators late in the month of November,” it concluded.