By : Dheeraj Upadhyay
Covid second wave has not only taken a toll on lives but has also devastated the economy; the consequences are seen in dampened economic sentiment and sluggish demand both in rural and urban India. Covid pandemic is here to stay and we have to live and grow with it by adopting required protocols and vaccination.
Industry pundits believe that vaccination is the key to offset the economic slowdown induced by the covid lockdown. Vaccination will remain the top priority and policy of any government across the world, says IMF Chief in an interview with CNBC. Even the Reserve Bank of India (RBI) has reiterated the same in its latest release that India’s economic recovery will depend on the speed and scale of vaccination in the country.
“Going forward, it’s the speed and scale of vaccination that will set & shape the path of economic recovery. The economy has shown resilience and it has all the ingredients to bounce back from the pandemic and unshackle it from pre-existing cyclical & structural hindrances,” said RBI.
Vaccination for all to revive growth
Meanwhile, the Modi govt has announced free vaccination to all in order to tame the virus and move forward to attain sustainable growth. Aggressive vaccination and improvement in healthcare infrastructure in both rural and urban areas is the need of the hour.
On the economic growth front sluggish demand or the “demand shock” is the biggest toll of the second wave which has impacted the economy rather than supply hindrances. People who have lost their income in the form of job loss closed business, and high costs of medical treatment; are now wary of discretionary spending.
The second wave appears to have washed away the economic resilience shown by industry after the normalization of economic activities after the first wave. Even the sentiments in the hinterland are very weak and people are choosing to save rather than spending on discretionary items,” said Ramesh Iyer, managing director, Mahindra Finance, one of the biggest lenders in the rural sector.
Rating agency ICRA views that India’s vaccination drive needs a boost to offset the fears of a potential third wave; damaging people’s confidence in the economic outlook.
GDP data and economy
Now it was obvious that the overall GDP growth would be less than the earlier expectations —in 2021-22 the GDP growth is expected to be around 8 percent. The real GDP level in 2019-20 stood at Rs 145.7 lakh crore while at the end of 2021-22, the GDP level may be the same or lower than that of 2019-20. In simple parlance, India would have zero percent or negative growth over the two-year period FY20 to FY22. In order to achieve economic revival and a 5 trillion economy, extra effort is required to compensate for the lost growth and put the economy on a higher growth trajectory.
The Indian economy has shown the green shoots amid the second wave of the pandemic since contactless services and agriculture are holding up, while industrial production and exports have surged compared to last year amidst pandemic protocols.
India has all eyes on the normal monsoon since good crop output will cool off inflation and boost rural demand with more money into the hands of the rural population. The country is also hoping for pent-up demand for everything from mobile phones to cars that spurred consumption when it reopened after the last lockdown. Above all vaccination seems to be a great economic as well as health booster amid this pandemic.