The Reserve Bank of India (RBI) in its monthly bulletin for June 2021 has estimated that the second wave may result in a ₹2-lakh-crore loss in output during the current financial year.
This observation comes as region-specific restrictions for containment and the spread of the virus into smaller cities and villages undermined rural demand. The Indian economy continues to fight with the second wave of Covid-19 with cautious optimism returning. The report has been authored by RBI deputy governor M.D. Patra.
The loss in economic output may not have any direct relation with the GDP, but points towards loss in the value- addition across the economy.
Key points in the Bulletin
As per a report by The Times of India, the RBI said that the rate of decline in deposits has been higher, indicating that household savings have dropped in the second wave in comparison to the first wave. On one hand, the RBI has said that the second wave has hit domestic demand, on the other hand, several aspects of aggregate supply conditions like agriculture and contactless services are holding up. Industrial production and exports have surged compared to last year amidst pandemic protocols.
"Going forward, the speed and scale of vaccination will shape the path of recovery. The economy has the resilience and the fundamentals to bounce back from the pandemic and unshackle itself from pre-existing cyclical and structural hindrances," it added in a report by NDTV.
Further in the bulletin, RBI mentions that while Covid-19 has tested the limits of the flexibility in the fiscal policy frameworks in India as well as the rest of the world, It has also offered a unique opportunity to redefine fiscal policy in a manner that emphasises 'how' and 'how much'.
Finally, the bulletin says that in spite of the second wave, GST collections in the current financial year (till date) fared better than the last financial year, inculcating hope that the revenue base for states will be protected with a growth rate of 7 percent, and it may result in some surplus to compensate for the deficit from the previous year.