The finance ministry on Wednesday said rapid vaccination and front-loading of the fiscal measures planned in the FY22 Budget hold the key to invigorating the investment, and thereby consumption, cycle in the coming quarters.
In its latest monthly report on the economy, the department of economic affairs said as witnessed in the March quarter, where “growth in capex generated positive spill-overs for consumption, including in the contact-sensitive sectors, these steps would facilitate recovery post the second wave”.
Manufacturing and construction are expected to experience a softer economic shock in the current quarter, with localised lockdown curbs in states being more adaptive to learnings from the first Covid wave, the report said. The prospects for the agriculture sector continue to remain robust amid the expectation of a normal monsoon. “Quickening the pace and coverage of vaccination is critical to help India heal and regain the momentum of economic recovery,” it added.
Vaccinating to achieve herd immunity (75-80% of the population) will boost consumer and producer confidence and reinvigorate the engines of economic growth. So, challenges relating to vaccine supply, vaccine hesitancy, operational aspects to achieve high daily throughput, and widespread reach must be anticipated and planned for in advance, it added.
Already, the country is undertaking the world’s largest vaccination drive, with 23.9 crore doses administered as on date.
Having witnessed a drop during the peak of the second wave, certain high-frequency indicators such as power consumption, E-way bills and foreign portfolio investment flows witnessed uptick in the second half of May 2021.
However, sequential slackening was observed in eight core industrial output, PMI manufacturing, steel consumption, auto sales, tractor sales, petroleum products consumption, rail freight, port and air traffic, PMI services, highway toll collections, GST collections and UPI transactions, the report said.