Backed by vaccinations and the experience from controlling the first wave of coronavirus pandemic, the Indian economy is well prepared to handle any downside risks posed by the second wave of COVID-19 cases, the Finance Ministry has said.
India is well-equipped with adequate testing and health infrastructure, and economic activity has adapted to the pandemic. This prospect is, further, bolstered by the fast roll-out of vaccination, the Department of Economic Affairs said in its monthly economic review.
India is witnessing a resurgence in COVID-19 cases for the last few weeks, with the country reporting 1,03,558 cases in the preceding 24 hours as on Monday morning.
"As the vaccination drive continuously upscales in India and guided by the learnings of India's successful management of pandemic during its first wave, India is well armed to combat any downside risk posed by the recent surge in COVID-19 cases," the report said.
Despite the surge in cases, it said, the recovery in economy is resilient with sustained improvement in majority of high frequency indicators.
The agricultural sector remains the bright spot of Indian economy with food grain production touching 303.3 million tonnes in 2020-21 beating record production levels for the fifth consecutive year in a row. While decline in PMI Manufacturing Index to 55.4 in March and fall in output of eight core industries in February and industrial production in January indicate some loss in momentum, manufacturing sector conditions continue to improve sharply, outpacing the long-run series average with firms scaling up production and witnessing upturn in sales, the ministry said.
The output of eight core sector industries fell at the fastest pace in six-months, contracting 4.6 per cent in February, while industrial output contracted 1.6 per cent year-on-year in January.
"On the positive side, further strengthening in demand conditions could be clearly seen in auto sales and power consumption. Monthly GST collections attained all-time record levels since its inception during March," the report said, adding that growth momentum in rail freight traffic remains upbeat along with year-on-year growth in port cargo traffic and pick up in domestic aviation.
It also said that the fiscal position of the Central government has witnessed improvement in recent months due to revival in the economic activities, and highlighted the 104.4 per cent growth in Centre's capital expenditure during October 2020-February 2021 as against a decline of 11.6 per cent in the first half of fiscal year 2020-21.
On inflation, the ministry highlighted the rise in CPI inflation to 5.0 per cent in February 2021. It said going forward, the food inflation trajectory would largely depend on the impact of favourable kharif and rabi seasons on cereal prices and seasonal winter arrivals on vegetable prices on one hand, and the adverse impact of rising international prices on edible oil prices and the persisting demand-supply mismatches for protein-based food prices, on the other.
"The outlook for core inflation is likely to be impacted by further easing in supply chains; however, broad-based escalation in cost-push pressures in services and manufacturing prices due to increase in industrial raw material prices could impart upward pressure," it added.
It concluded that a strong revival in investment growth supported by the 'AtmaNirbharBharat Mission' and a 'massive boost' to infrastructure and capital expenditure provided for in the Union Budget 2021-22 will be instrumental in the revival of Indian economy.
"The wheels of India's capex cycle have been set into motion, signs of which were imminent in the second half of the year. With the end of a challenging FY 2020-21, the crest of a brighter and self-reliant FY 2021-22 awaits India!," the ministry said.