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Wednesday, August 04, 2021

‘Economy bouncing back from 2nd wave hit, inflation a risk’

The report noted that various high frequency indicators of economic activity — such as power consumption, rail freight, GST collections among others — indicate improvement in June.

By: ENS Economic Bureau | New Delhi |
July 10, 2021 4:15:26 am
Emergence of a third wave could be significantly buffered by expanding vaccination along with social distancing measures. (File)

The economy is showing signs of revival from the impact of the Covid second wave but inflation risks remain, the finance ministry said in its June Monthly Economic Review. It said significant coverage by the vaccine could provide a crucial boost for domestic demand. While average daily vaccination rate doubled in June over May, some like Bihar, Uttar Pradesh need to ramp up their drive.

“Average daily vaccination rate has doubled to 41.3 lakh doses in June compared to 19.3 lakh in May subsequent to implementation of the revised national COVID Vaccination Policy since 21st June 2021. At the current inoculation pace, it is estimated that India will administer over 67 crore doses before the festive season begins in September. A significant coverage by the vaccine could provide a crucial boost for domestic demand,” the report said.

“An analysis of the state wise proportion of population vaccinated relative to its share in total population indicates that Assam, Bihar, Uttar Pradesh, Tamil Nadu, West Bengal and Jharkhand need to ramp up their vaccination drive. Vaccination remains the key guard against any prospective future waves and the coverage of the population needs to be enhanced across all States,” it said.

Emergence of a third wave could be significantly buffered by expanding vaccination along with social distancing measures.

The report noted that various high frequency indicators of economic activity — such as power consumption, rail freight, GST collections among others — indicate improvement in June. However, supply side disruptions have caused inflation and inflationary risks are expected to persist.

“Inflationary pressures took an upturn in May 2021 with headline inflation (CPI-C) and WPI inflation touching a high of 6.3 per cent and 12.94 per cent respectively. Supply side disruptions in states and unfavourable base effects drove the broad-based momentum in retail inflation across food, fuel and core categories,” it said.

On the other hand, electricity and manufactured products inflation led the uptick in wholesale inflation. Healthy monsoon coverage, gradually rising Kharif sowing and unlocking of states is expected to ease food, and thereby headline, inflation. However, risks due to global demand-led recovery in commodity prices and input cost pressures remain, the report argued. It added the recently announced economic relief package worth Rs 6.29 lakh crore is expected to revive the capex cycle in the economy.

Consumption sentiment is expected to pick up with further enhancement of employment support under Aatmanirbhar Bharat Rozgar Yojana (ANBRY), targeted support to the urban poor through the credit guarantee scheme for on-lending by micro-finance institutions, the review said.

 

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