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Updated May 7th, 2021 at 17:15 IST

Second COVID-19 wave's impact on India's economy muted compared to first: Finance Ministry

The Finance Ministry's report said that the impact of the second wave on the economy is likely to remain muted as compared to the first COVID-19 wave.

Reported by: Astha Singh
PTI/AP
PTI/AP | Image:self
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As the country is currently witnessing the deadly outbreak of the second wave of the COVID-19 crisis, the finance ministry released its monthly economic report. The ministry said that the impact of the second wave on the economy is likely to remain muted as compared to the first wave. It admitted that in the first quarter of FY2021-22 the second wave has posed a downside risk to economic activity. As per the report, 'there are reasons to expect a muted economic impact as compared to the first wave. Learning to 'operate with COVID-19', as borne by international experience, provides a silver lining of economic resilience amidst the second wave'.

It added that with a revival in the economic activities during the second half of FY2020-21, the central government's fiscal position has witnessed an improvement in recent months. According to the provisional figures, net direct tax collections for the year 2020-21 are 4.5 per cent higher than Revised Estimates (RE) and 5 per cent higher than collections in 2019-20. The significant growth compared to 2019-20 indicates economic recovery since the first wave.

Owing to economic recovery, in each of the last six months, GST mop-up registered good growth and collections exceeded Rs 1 lakh crore. GST revenue registered another record high of Rs 1.41 lakh crore in April, indicative of continued economic recovery.

However, as per the report, the second wave of the pandemic hit the market sentiment as Nifty 50 and the S&P BSE Sensex recorded losses of 0.4 per cent and 1.5 per cent respectively in April, and the rupee decreased by 2.3 per cent to reach 74.51 INR/USD in April. This was mirrored by net FPI outflows of USD 1.18 billion in April.

Finance Ministry report said:

  • With the open market operations worth Rs 3.17 lakh crore carried out in 2020-21, the domestic financial conditions continue to remain comfortable with RBI's support to liquidity.
  • Sectorally as per the reports, agriculture, medium industry and trade services led the credit offtake in March, while credit to small and large industry and NBFC services remained subdued. To raise substantial funds from financial markets, easy financing conditions enabled the corporate sector. 
  • Digital payments continued to gain momentum in April with UPI transactions volume and amount more than doubling previous year levels.
  • With a normal monsoon and expected supply easing of food products, softening food and fuel prices may provide succour to a potent risk of rising in input prices surfacing as retail inflation, the report said. 
  • With a 12.5 per cent growth in net sales, the latest data on corporate earnings signals a manufacturing turnaround in the fourth quarter of 2020-21 and a 9.5 per cent rise in income for a sample of 213 companies.

(With PTI Inputs)

(Image Credits: PTI/AP)

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Published May 7th, 2021 at 17:15 IST

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