COVID second wave triggers raft of progress forecast revisions: RBI annual report

Reserve Bank of India on Thursday stated that the second wave of COVID-19 pandemic has triggered revision of progress projections for the present monetary 12 months with consensus gravitating in direction of its earlier forecast of 10.5 per cent.
The central financial institution, in its annual report for 2020-2021, additional stated that earlier 12 months has left a scar on the financial system 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 per cent for the year 2021-22 — 26.2 per cent in Q1, 8.3 per cent in Q2, 5.4 per cent in Q3 and 6.2 per cent in Q4,” it stated.

The pandemic, it added, “is the biggest risk to this outlook. Yet, upsides also stem from the capex push by the government, rising capacity utilisation and the turnaround in capital goods imports.”
RBI additional stated {that a} collective world effort to combat the pandemic will certainly carry higher outcomes than particular person international locations preventing on their very own.
It additionally stated the conduct of financial coverage in 2021-22 can be guided by evolving macroeconomic circumstances, with a bias to stay supportive of progress until it positive aspects traction on a sturdy foundation whereas making certain inflation stays inside the goal.
According to it the tempo of contagion within the second wave of COVID-19 pandemic has been alarming, stretching the well being infrastructure by way of the capability to deal with a surge of this measurement and velocity.
The report stated the deterioration in main fiscal indicators in 2020-21 could also be attributed to the pandemic superimposed on a cyclical slowdown in tax revenues and a counter-pandemic fiscal push by larger authorities expenditure.
“Going forward, as growth revives and 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 stated.
For April and early May 2021, obtainable excessive frequency indicators current a blended image, it stated.

While mobility and sentiment indicators have moderated, a number of exercise indicators have held their very own and proven resilience within the face of the second wave.
Goods and companies tax (GST) collections crossed the Rs 1 lakh crore mark for the seventh consecutive month in April and notched up the best stage on report, suggesting that manufacturing and companies manufacturing has been maintained, it stated.