The Reserve Bank of India (RBI), in its latest report, said the Indian economy continues to wrestle with the second wave of the pandemic, though cautious optimism is returning. By current assessment, the second Covid wave's toll is mainly in terms of the hit to domestic demand. "On the brighter side, several aspects of aggregate supply conditions -- agriculture and contactless services are holding up, while industrial production and exports have surged compared to last year amidst pandemic protocols," the report said.
The central bank has said going forward, the speed and scale of vaccination will shape the path of recovery. Observing that vaccines by themselves will not end the pandemic, the RBI article said, "we have to learn to live with the virus, complementing vaccines with ramping up investment in healthcare, logistics and research. The pandemic is a real shock with real consequences. Hence, there is a need to ensure that the recovery is built on a solid foundation of business investment and productivity growth."
It said the Indian economy has the resilience and the fundamentals to bounce back from the pandemic and unshackle itself from pre-existing cyclical and structural hindrances.
The RBI article 'State of economy', written jointly by RBI Deputy Governor MD Patra and other officials, said the slope of the yield curve is found to have steepened with abundant liquidity depressing short-term interest rates more than proportionately alongside a pick-up in issuances of ultra-long dated paper.
The RBI said views expressed in the article are those of the authors and do not necessarily represent its views. On the fiscal framework and quality of expenditure in India, the RBI report said as India unwinds the fiscal stimulus and embarks on the path of fiscal adjustment, it is necessary to emphasise on 'how' over 'how much'.
The RBI article noted that the finance ministry estimates that to achieve herd immunity and regain the momentum of the economic recovery, the target population to be vaccinated is 70 crore by September 2021 and around 113 crore more doses are needed; accordingly, around 93 lakh vaccinations are required per day to achieve the herd immunity. While the peak daily vaccination rate attained to date is 42.65 lakh.
"Doubling the shifts and possibly vaccinating 24x7 for a couple of months can enable the ambitious, but possible, throughput of 1 crore shots a day," the ministry said in its May economic review.