ndia is poised to tackle any downside risk to the economy posed by the recent covid surge, guided by the learnings of its successful management of the pandemic during its first wave, while the vaccination drive continuously increases in scale, the finance ministry said on Monday.
“At the onset of the second wave, India is prepared to combat the scourge of the virus. It is well-equipped with adequate testing and health infrastructure and economic activity has adapted to the pandemic. This prospect is further bolstered by the fast rollout of vaccination,” the latest Monthly Economic Review released by the department of economic affairs said.
India registered more than a lakh coronavirus cases on Sunday, surpassing even the peak of the first wave of the pandemic, with almost 50% of the cases being reported from Maharashtra. The state imposed a partial lockdown on Sunday, closing down malls, theatres, hotels, restaurants and imposing a statewide night curfew to curb the transmission of the virus.
Maharashtra is the largest state in the country in terms of gross state domestic product (GSDP) and has a share of around 15% in gross value added (GVA). Thus, the stringent restrictions put in place will lower India’s GVA growth to 9.92% for FY22 and bring GDP growth down to 10.7-10.9%, said Madan Sabnavis, chief economist at Care Ratings.
“Care Ratings had estimated growth of 10.24% in GVA for FY22 for India towards the end of March, where it was assumed that there would be return to normalcy during the year. However, with FY22 starting on a sombre note with a lockdown fully in place for Mah-arashtra and to a lesser extent in other states, overall production and consumption would be affected,” it said.
The finance ministry, however, said India is well-equipped to combat the effects of the virus. “Instrumental in this resilience will be a strong revival in investment growth supported by the Atmanirbhar Bharat Mission and a massive boost to infrastructure and capital expenditure provided for in the Union budget for 2021-22. The wheels of India’s capex cycle have been set into motion, signs of which were imminent in the second half of the year. With the end of a challenging FY21, the crest of a brighter and self-reliant FY22 awaits India,” it said.
The prospect of economic revival is further bolstered by the fast rollout of the vaccination programme, the finance ministry said. “India is emphasizing on a five-fold strategy, including an exponential increase in testing, effective isolation and contact tracing of those infected, re-invigoration of public and private healthcare resources, ensuring of covid-appropriate behaviour, and a targeted approach to vaccination in districts reporting large numbers of covid cases,” it said.
The vaccine doses administered so far has touched 78.8 million, according to the health ministry. Rating agency Crisil Ltd said in a report on Monday that vaccination has been progressing slowly, with only 5.5 doses administered per 100 people in India against the world average of 8.3 doses. “But it is expected to pick up pace in April with inoculation opening up for people aged 45 years and above,” it said.
India’s Purchasing Managers’ Index (PMI) for the manufacturing sector fell to a seven-month low in March as demand growth was constrained by the escalation of the covid-19 pandemic.
However, the finance ministry quoted a slew of high-frequency indicators for March, such as GST collection, rail freight traffic, merchandise exports and digital payments to conclude that the economy is poised to build back better and stronger after battling a historic pandemic in FY21.