Vaccination drive, waning second wave set stage for economic revival: Finmin report

Vaccines administered so far stand at 51.45 crore doses, covering 49.8% of the country’s adult population with first dose and 14.2% fully vaccinated.

The finance ministry on Tuesday said the receding of the second Covid-19 wave, coupled with the rapid progress in vaccination, has set the stage for further accelerating economic recovery.

In its economic report for July, the department of economic affairs asserted that high-frequency gauges — including manufacturing PMI, GST collection, exports, rail freight, power demand and crop sowing — “clearly point towards a broad-based economic revival” in July, even as the dominant services sector continues to reel under the impact of the second wave.

The services sector, which accounts for more than 55% of the gross domestic product, shrank for a third straight month in July, although the level of contraction narrowed from June, PMI data showed.

The report said 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”. Annual growth in currency in circulation, the largest component of reserve money, eased to 10.25% as of July 30 from 12.32% in June and 22.17% in July 2020.

It said PMI Manufacturing sharply rebounded to the expansionary zone in July, while GST collection reclaimed the `1 lakh-crore-plus territory, mirroring increased business and consumer activity. At 112.7 million tonne, rail freight in July hit a record for the month and posted an increase of 18.3% from the year ago and 13.2% from the pre-Covid level (July 2019). Kharif sowing, fertiliser sales, power consumption, vehicle registrations, highway toll collections, e-way bills and digital transactions — all these indicators showed improvement.

The finance ministry expects retail inflation, which stayed above the central bank’s tolerance level (2-6%) for a third straight month in June, 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”.

The recent seroprevalence results suggest that India can reduce the chances of severe illness due to Covid-19 if it sustains the momentum of its vaccination drive. The serosurvey indicates that as much as 67.6% of the population above six years had antibodies. Similarly, 81% and 89% of individuals who have received one dose and two doses, respectively, have the antibodies. Even among those who have not been vaccinated, seroprevalence is 62.3%. The trends in immunity “lend a ray of hope in reducing severe illness due to pandemic”.

“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,” the report said.

India’s vaccination drive continues to make further headway, with the number of days taken to achieve an additional 10 crore doses reducing from 86 days during the initial phase to 20 days now. Vaccines administered so far stand at 51.45 crore doses, covering 49.8% of the country’s adult population with first dose and 14.2% fully vaccinated.