The momentum of economic recovery has been moderated by the ravaging second wave of COVID-19 admits Finance Ministry in its monthly economic review for the month of May. However, it maintains rapid vaccination, front-loading of fiscal measures will hold the key to invigorating investment and consumption cycle in coming quarters. 

“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,” maintained Finance Ministry. 

India’s Q4 FY21 GDP stood at 1.6%, the lowest in 40 years. Experts say Q1 FY22 GDP could also be hit due to localised lockdowns to curb the second wave and have called for rapid vaccination to bolster demand.

India’s central bank, RBI, has also slashed India’s FY22 GDP forecast to 9.5% from 10.5% and called for policy support from all sides in its last monetary policy. 

The government, meanwhile, has centralized the vaccine procurement plan and aims to vaccinate at least 1 cr people daily by August. 

Finance Ministry says vaccinating over 75% of the population will boost consumer and producer confidence and reinvigorate the engines of economic growth. “For this purpose, challenges pertaining to vaccine supply, vaccine hesitancy, operational aspects to achieve high daily throughput, and widespread reach must be anticipated and planned for in advance,” it adds. 

India’s daily covid cases are declining and states have begun unlocking even as concerns remain on the impending third wave. The Finance Ministry believes high-frequency indicators have started turning the corner, indicating a pick up. 

“After declining during the second wave. high-frequency indicators such as power consumption, E-way bills, and foreign portfolio investment (FPI) flows witnessed an uptick in the second half of May,” it observes. The agriculture sector, however, continues to offer comfortable prospects amidst a normal monsoon forecast, smooth food procurement and distribution, and MGNREGA employment.