The second wave of Covid-19 in India poses a downside risk to economic activity in the first quarter of FY22, the Finance ministry has said in its Monthly Economic Review Report for April 2021, in the backdrop of rising Covid infections and fatalities across the country. But the report goes on to say that the government still expects a "muted economic impact" of the second wave compared to the first wave.
India was on the recovery path after two successive quarters of de-growth last year. The GDP had contracted by a massive 23.9 per cent in the June quarter amid the pandemic-led nationwide lockdown and by 7.5 per cent during the September quarter. India thereafter stepped out of recession, with the GDP growing 0.4 per cent in the December quarter.
But the momentum in economic recovery moderated in April due to the onset of second Covid wave in India. The second wave has witnessed a higher caseload, with new peaks of daily cases, daily deaths and positivity rates. The total number of active cases have surged past the 35-lakh mark, accounting for 17 per cent of the total infections. And the daily new deaths are almost 3 times higher than the first wave.
The Finance Ministry has expressed confidence that "Learning to operate with Covid-19, as borne by international experience, provides a silver lining of economic resilience amidst the second waves." In fact, the governmeNt's policy response to the second wave has been marked by localized micro-containment measures, state-specific movement restrictions, mobilization of health supplies and ramping up of health infrastructure.
Recently, Wall Street brokerage Goldman Sachs lowered its estimate for India's economic growth to 11.1 per cent in fiscal year to March 31, 2022 as many cities and states have announced lockdowns of varying intensities to check spread of coronavirus infections.
Agriculture is one sector that stands out amid the Covid gloom, with record foodgrain production estimated in the ensuing crop year on the back of predicted normal monsoons. India is set to have the third consecutive normal monsoon this year, with the India Meteorological Department predicting a normal southwest monsoon in the June-September period.