The second Covid wave poses a downside risk to economic activity in the first quarter of 2021-22 fiscal year, even though its impact may be muted when compared with that of the first wave, according to the Finance Ministry.
As the increased vaccination is effective both in controlling the Covid spread and boosting mobility, the “need of the hour is, therefore, to expand vaccination at a fast pace”, the Ministry noted in its Monthly Economic Review for April released Friday.
“The second wave in India is witnessing a much higher caseload with new peaks of daily cases, daily deaths and positivity rates and presents a challenge to ongoing economic recovery … However, there are reasons to expect a muted economic impact as compared to the first wave. The experience from other countries suggests a lower correlation between falling mobility and growth as economic activity has learnt to operate ‘with Covid,” it said, while noting that the momentum in economic recovery since the first wave has moderated during April.
Learning to operate with Covid, as borne by international experience, provides a silver lining of economic resilience amidst the second wave, with India emphasising on a five-fold strategy to curb the tide of new Covid cases –Test, Track, Treat, Covid Appropriate Behaviour and Vaccination, as per the review released by the Department of Economic Affairs.
Growing infections and consequent restrictions, though local/ regional in nature, have imparted a downside risk to economic activity. “The impact of restrictions is evident in a decline in the google mobility indicator to -37 percent in April 2021 from around -22 percent in the preceding month. The Oxford Stringency Index in India has surged to around 71 in April 2021 from 59 in the preceding month, though it is still below 100 in April 2020 and average of 85 in Q1: FY 2020-21,” the review noted.
It said the Central government as well as the states are focussing on stepping up capital expenditure to support economic activity, while a series of measures are being taken to tackle Covid-19.