Economic rejuvenation evident in indicators, inflation to come down: Finance Ministry – Mint

“The swift rebound in economic indicators and the muted impact of the second wave is corroborated by upward revision of RBI estimates for real GDP growth in Q1: 2021-22 to 21.4% from its June estimation of 18.5%. The robust recovery in tax collections cushions the fisc towards meeting the budgeted support to the economy,” the Monthly Economic Review for July said.

The finance ministry said the movement of high frequency indicators in July clearly point towards a broad-based economic revival. PMI Manufacturing sharply rebounded to expansionary zone in July emerging from the previous month’s contraction. GST collection also reclaimed its ₹1 trillion plus territory in July signifying increased business and consumer activity. Rail freight in July hit a record 18.3% growth. The surge in economic activity in July was further corroborated by trends in Kharif sowing, fertilizer sales, power consumption, vehicle registrations, highway toll collections, e-way bills and digital transactions. Latest available data on growth of eight core industries, auto sales, tractor sales, port traffic, air passenger traffic also indicate sequential improvement from the contraction induced by the second wave.

Bright prospects of economic normalization are also evident in the external sector indicators with consumption of petroleum products recovering in June and exports rebounding strongly to their highest ever monthly achievement at $35.2 billion in July, the finance ministry said.

The finance ministry said though inflation has remained above the central bank’s upper limit of 6%, these pressures are likely to smoothen out over the coming months with easing of restrictions, progress of southwest monsoon, and recent supply-side policy interventions in pulses and oilseeds market. “While systemic liquidity continued to remain in surplus in July, a decline in growth of cash in circulation reflected a shift away from pandemic-induced precautionary savings,” the report said.

The report said the recent sero-prevalence results signify that India can soon limit hospitalizations and deaths due to the covid infection if the momentum of the vaccination programme is sustained. “Having antibodies reduces the probability of acquiring serious illnesses, as is borne by studies. So, any subsequent waves are expected to be mild in their impact on hospitalisations and deaths. At this juncture, the economy and society are at a crucial inflection point where sustenance of economic recovery, vaccination progress and covid-19 appropriate behavioural strategies are needed in close synergy with each other,” it added.

As on date, India has administered 51.45 crore first doses, covering 49.8% of the adult and 14.2% fully vaccinated with two doses. The latest sero-survey results by ICMR indicate that 67.6% of the population above 6 years had anti-bodies while 81% and 89% of individuals who have received one dose and two doses of the vaccine respectively have the antibodies. Even among those who have not been vaccinated, sero-prevalence is 62.3%. “As recent research demonstrates clearly, these trends in immunity lend a ray of hope in reducing severe illness due to pandemic,” the finance ministry said.