August 11, 2021 3:00:35 am
The third Covid wave is unlikely to be as devastating as the second one, as the country’s vaccination drive gathers speed, but there is a need to remain guarded against the virus, the Finance Ministry said on Tuesday in its Monthly Economic Report for July. The receding of the second wave, along with rapid progress in vaccination, has set the stage to further accelerate economic recovery, it said.
With the second wave abating in most parts of the country and states lifting restrictions in phases, there are visible signs of economic rejuvenation since the second half of May, it said. This resonates with the economic impact of the second wave expected to be muted.
“India’s vaccination drive continues to gather speed and breadth with the number of days taken to achieve an additional 10 crore doses reducing significantly from 86 days during the initial phase to 20 days now … the IIT-Kanpur SUTRA model predicts that the third wave is unlikely to be as devastating as the second one with infections and hospitalisations expected to be much lower than that in the second wave,” the Ministry said.
Noting that inflation has remained above the band of 6 per cent in May and June, the report said these pressures are likely to smoothen out in 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 Covid-induced precautionary savings.
Financial markets demonstrated buoyancy in the month, with post-second wave revival seen in mutual funds, corporate bonds and insurance markets, and volatility in equity markets continuing its downward trajectory. However, G-sec yield curve steepened mildly owing to inflation pressures, it said.
“In sum, as 85 per cent of the most vulnerable 45+ (age) population has developed immunity against severe illness due to Covid, the impact of subsequent waves on hospitalisations and deaths may be limited even though these waves may cause increase in infections. The attention must therefore now be directed to similarly enhancing immunity among the children and adults in the 18-44 age groups,” it said.
“Delta variant accounted for nearly 8 of every 10 cases of Covid disease in India from May to July. This resurgence is a reminder of how critical it is to continue maintaining the guard against an unpredictable virus,” it said.
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