The economic recovery was disrupted by Covid’s second wave. The progression of the cases weighed heavily on health. After the first wave, governments believed they could save both lives and jobs, but this belief was shattered when locks could not be stopped.
The Center, meanwhile, left options on including the major disease in the states. Although the severity of the lockout was much lower than last year, the rate of expansion forced the state to place significant restrictions on economic activity.
The first wave saw close to 7.3% volatility in FY21. But the recovery is beginning, and the official expectation, from the government and the RBI, is that the economy will register 10.5% growth in FY22 (26.2% in Q1).
However, in assessing the severity of the second wave, the RBI has revised first-quarter growth to be down to 18.5% and overall growth for the year at 9.5%. Most credit bureaus and lending companies, including the IMF and ADB, made downward adjustments for FY22 growth, from 9% to 9.5%.
Even if economic activity resumes and the economy grows by 9.5%, the overall economy will be in line with the level it was in FY 20. The economy has also slowed to a downturn. infectious disease (estimated growth of about 3% in Q4FY20 and 4% in FY20). Therefore, even if economic activity resumes, the economy may not able to register 7.7% growth.
The government so far has been very prudent in its monetary policy, and many of the motivators are conditions in the expansion of criminal debt; the direct cost of the budget stimulus this year is 1% of the economy. The projected expenditure increase in this year’s budget is 1% over the revised FY21, and financed expenditure lowered to 2.7%.
The government should discuss the issue of governance in public banks (PSBs). Although the Financial Conduct Report shows a cleanup of the NPA situation and many PSBs have turned back on their profits, lending is still slow.
“Atmanirbhar Bharat” will not help the country achieve competition, and will only add to the protectionist situation. Amending the list of exemptions to the payroll in October will only add to the protection.
GST revenue reached Rs 1.43 billion in April. However, it later fell due to the lockdown. During the recess, it is likely that the reform will be intensified which will provide an opportunity for the GST Council to initiate changes – such as the combination of 12% and 18% timber in the 15% and reduced the cost of cement and its products, steel, paint, marble and marble from 28% to 15%. It also assists in the automotive sector. There is an urgent need to restore confidence in the manufacturing, trade, transportation, and construction sectors.