The impact of the second wave of COVID-19 is still prominent. In the latest RBI Bulletin, it was stated that the Indian economy continues to wrestle with the second wave of the COVID. It also stated that improvement is expected in early July.
According to the June Bulletin, it stated, “The Indian economy continues to wrestle with the second wave of the pandemic, though cautious optimism is returning, with greater improvement expected by early July, as predicted by statistical/ mathematical models.”
The bulletin stated that the second 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 amidst pandemic protocols.”
The provisional estimates (PE) of annual national income by the National Statistical Office (NSO) on May 31 revised upward India’s real GDP growth by 0.7 percentage points from the second advance estimates to a lower contraction of 7.3 per cent in 2020-21. However, the bulletin stated the recovery of the economy will depend on vaccination. “Going forward, the speed and scale of vaccination will shape the path of recovery. The economy has the resilience and the fundamentals to bounce back from the pandemic and unshackle itself from pre-existing cyclical and structural hindrances.”
The bulletin stated RBI in its June 4 resolution saw the inflation trajectory in India being shaped by both upside and downside risks. In its view, rising international commodity prices, especially of crude, logistics costs, excise duties, cesses and taxes pose upside risks to the inflation outlook. On the other hand, expectations of a normal south-west monsoon, recent supply side interventions in the pulses market and further supply side measures to cool pulses and edible oil prices, and easing of containment measures with declining infections are seen as forces that would mitigate cost pressures and inflation going forward. Weak demand conditions may also temper the pass-through to core inflation.