Virendra Pandit
New Delhi: With the second wave of Covid-19 waning now, the Reserve Bank of India (RBI) on Thursday said the country’s GDP growth in 2021-22 could be around 10.5 percent.
The second wave of the pandemic has triggered a revision of growth projections for the current financial year with consensus gravitating towards its earlier forecast of 10.5 percent, the central bank said in its annual report for FY21.
The previous year left a scar on the economy and “in the midst of the second wave, as 2021-22 commences, pervasive despair is being lifted by cautious optimism built up by vaccination drives.”
“The onset of the second wave has triggered a raft of revisions to growth projections, with the consensus gravitating towards the Reserve Bank’s projection of 10.5 percent for the year 2021-22 — 26.2 percent in Q1, 8.3 percent in Q2, 5.4 percent in Q3 and 6.2 percent in Q4,” it said, giving quarter-wise projections.
The pandemic, it added, “is the biggest risk to this outlook. Yet, upsides also stem from the capex push by the government, rising capacity utilization and the turnaround in capital goods imports.”
A collective global effort to fight the pandemic will surely bring better results than individual countries fighting on their own.
It also said the conduct of monetary policy in 2021-22 would be guided by evolving macroeconomic conditions, with a bias to remain supportive of growth until it gains traction on a durable basis while ensuring inflation remains within the target.
The report said the pace of contagion in the second wave has been alarming, stretching the health infrastructure in terms of the capacity to handle a surge of this size and speed.
The deterioration in major fiscal indicators in 2020-21 may be attributed to the pandemic superimposed on a cyclical slowdown in tax revenues and a counter-pandemic fiscal push through higher government expenditure.
“Going forward, as growth revives and the economy gets back on track, it is important for the government to adhere to a clear exit strategy and build fiscal buffers, which can be tapped into in events of future shocks to growth,” the RBI said.
For April and early May 2021, when the second wave surged the most, available high-frequency indicators present a mixed picture, it said.
While mobility and sentiment indicators have moderated, several activity indicators have held their own and shown resilience in the face of the second wave.
Goods and services tax (GST) collections crossed the Rs 1 lakh crore mark for the seventh consecutive month in April and notched up the highest level on record, suggesting that manufacturing and services production has been maintained, it added.