2ND WAVE IMPACT MUTED AMID SIGNS OF REVIVAL: FINMIN

NEW DELHI: The swift rebound in economic indicators since the second half of May resonates with the expectation that the impact of the second wave on economic activities will be limited amid visible signs of “economic rejuvenation”, the finance ministry said on Tuesday.

“The swift rebound in economic indicators and the muted impact of the second wave is corroborated by upward revision of RBI (Reserve Bank of India) estimates for real GDP (gross domestic product) growth in Q1: 2021-22 to 21.4% from its June estimation of 18.5%. The robust recovery in tax collections cushions the fisc towards meeting the budgeted support to the economy,” the ministry’s monthly economic review for July said.

The finance ministry said the movement of high-frequency indicators in July clearly points towards a broad-based economic revival. PMI manufacturing sharply rebounded to expansionary zone in July, emerging from the previous month’s contraction. Goods and services tax (GST) collection also reclaimed its ₹1 lakh crore plus territory in July, signifying increased business and consumer activity. Rail freight in July hit a record 18.3% growth. The surge in economic activity in July was further corroborated by trends in Kharif sowing, fertilizer sales, power consumption, vehicle registrations, highway toll collections, e-way bills, and digital transactions. Latest available data on growth of eight core industries, auto sales, tractor sales, port traffic, air passenger traffic also indicate sequential improvement from the contraction induced by the second wave.

Bright prospects of economic normalization are also evident in the external sector indicators with consumption of petroleum products recovering in June and exports rebounding strongly to their highest ever monthly achievement at $35.2 billion in July, the ministry said.

The finance ministry said though inflation has remained above the central bank’s upper limit of 6%, this is likely to smoothen over next few months.