India’s finance ministry officials believe the current second wave of Covid-19 will not impact the economy as much as the first wave, and the central bank agrees, but some experts say this will not be the case.
The country’s gross domestic product contracted 7.3% in 2020-21, its first contraction since 1979-80, and was mainly caused by the first wave of Covid-19 and the nationwide lockdown.
India’s chief economic adviser Krishnamurthy Subramanian has projected that the second wave’s impact on the economy will not be as severe as the first one. The Reserve Bank of India also feels the second wave’s impact will be confined to the April-June quarter and may spill over to July.
However, former Chief Statistician Pronab Sen said the first wave’s damage was calculable and limited, but this time it is more complex, he told television channel ET Now. He warned that if the uncertainty persists, the second wave may cause more damage.
Sen pointed out that last year when the lockdown was lifted there was a sharp recovery, but this time it may not happen.
He felt that fiscal stimuli this time should be formulated by the federal government in close coordination with state governments. “Unfortunately, over the course of the last one-and-a-half years, we see very little of that coordination happening,” he added.
Finance Minister Nirmala Sitharaman earlier said that a decision on providing another fiscal stimulus will be taken only after assessing the impact of the second wave.
The country’s largest state-run bank, the State Bank of India, and the Paris-based think tank OECD have lowered their growth projections for India. While the State Bank of India has slashed it from 11% to 7.9%, the OECD has cut its growth estimate for India from 12.6% to 9.9%.
Many economists feel that the second wave has pushed back India’s economic recovery by three to six months. With the second wave making inroads to villages, the rural economy will not be in a position to support overall growth as was evident during the first wave.
India’s current vaccine shortage is also a matter of concern. Many experts feel that boosting vaccine supply will not only safeguard Indian citizens from the virus, but also help in early economic recovery.
Though the government has assured that the entire population will be vaccinated by the end of this year, many states are going slow due to a shortage of vaccines. India has administered about 212 million doses, but has given the necessary two doses to only 3% of its 1.35 billion people.