Finance Ministry signals prospects for a second wave of COVID-19 as ‘downside risk’
India’s economy is firmly on the path to a V-shaped recovery after the collapse in the first quarter, and further improvement is expected in the third quarter, ‘despite some moderation’ in November indicators, it said. on Thursday the Finance Ministry, attributing the recovery to the unlocking process along with “cunning” stimulus measures.
However, the prospects for a second wave of COVID-19 infections remain the main downside risk to the economy, with ‘Gujarat, Madhya Pradesh, Rajasthan, Uttar Pradesh and Delhi likely facing their second and third waves’ in November. the ministry said. .
“However, there is increasingly cautious optimism that the sharp declines in the April-June quarter may not resurface with significant progress in vaccines and contact-intensive sectors increasingly adapting to virtual normality,” he said. the ministry in a monthly financial report. “The prospects for a vaccine are encouraging, but we must remain on guard until it is approved and rolled out to a large portion of the population,” he added, urging people to follow appropriate COVID behavior and maintain safety protocols with seriousness.
Arguing that inflation, which had risen to 7.61% in October, may have peaked, the ministry’s Department of Economic Affairs said that consumer price inflation was likely to “ gradually decelerate ” to as baseline effects take place and food inflation is expected to cool off thanks to a good kharif harvest.
Agriculture, which has grown steadily at 3.4% during the first half of 2020-21, is expected to remain the bright spot of the economy and rabi crop planting shows a healthy increase in late November, he noted. the department in its report. By November 27, the total area under rabi cultivation was 4.02% higher, and the area cultivated with legumes increased 43.3%, the ministry said.
However, the distress of the rural workforce appears to have worsened. “The demand for jobs under the Mahatma Gandhi Rural Employment National Guarantee (MGNREGS) scheme has increased, with year-on-year growth of 47.2% in November. As of November, 266.67 million rupees per person have been created under the scheme, an increase of 51.3% compared to the previous year, ”the ministry noted.
“This shows that the plan has been effective in alleviating rural distress during the period of the pandemic, especially for migrants who returned to their villages. The additional allocation of 10 billion rupees in the latest package for Pradhan Mantri Garib Kalyan Rozgar Yojana would further boost job creation in the rural sector and complement rural income, ”he added.
“This V-shaped recovery, evident in the intermediate stage of 2020-21, reflects the resilience and strength of the Indian economy. The fundamentals of the economy remain strong as the gradual easing of lockdowns, coupled with the shrewd support of the Atmanirbhar Bharat mission, has put the economy firmly on the road to recovery, ”the ministry said, referring to the contraction of 7.5% registered in the second quarter. after the 23.9% drop recorded at the peak of the “strict” lockdown in the first quarter.
“Sustained improvement in high-frequency indicators in October and November ignites optimism for better performance in the third quarter,” the DEA said, adding that recent fiscal support measures would help revive the economy more quickly.
“The timely announcement of the third tranche of the Atmanirbhar Bharat package on the eve of Diwali with a multi-sector focus on the labor market, stressed sectors, social welfare, manufacturing, housing, infrastructure, exports and agriculture, is also a significant step towards a further revival. rapid economy, restoring lost jobs and creating new ones, ”the ministry said.
“Moving into the third quarter, there is cautious optimism that global economic uncertainty is not reflected in India despite moderation in some high-frequency indicators at the end of November,” he concluded.
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