Impact of COVID-19 second wave on the Economy to Remain Muted- FM report

Impact-of-COVID-19-second-wave-on-the-Economy-to-Remain-Muted-FM-report
GST revenue recorded another record high of ₹ 1.41 lakh crore in April during COVID-19 second wave

The impact of the second wave of the coronavirus pandemic on the economy is likely to remain muted as compared to the first wave, the finance ministry said in its monthly economic report.

Assuming that the second wave of epidemics posed a downside risk to economic activity in the first quarter of the fiscal year 2020-22, the report stated that “there are reasons to expect a tighter economic impact than the first wave.

COVID-19 as borne by international experience provides a silver lining of economic resilience amidst the COVID-19 second wave.

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Finance Ministry Report

  • The fiscal position of the central government, it said, has witnessed an improvement in the recent months with a revival in the economic activities during the second half of FY2020-21.
  • According to provisional figures, net direct tax collections for 2020-21 are 4.5 percent higher than the Revised Estimates (RE) and 5 percent higher than collections in 2019-20 during coronavirus.
  • A significant increase in economic growth compared to 2019-20 Provides signal recovery since the first wave.
  • The GST mop-up registered a good growth and the collection rose to over Rs 1 lakh crore due to the economic recovery in the last six months of coronavirus, adding that.
  • GST revenue recorded another record high of ₹ 1.41 lakh crore in April. Which was a sign of continued economic recovery.
  • However, the report noted that the second wave of the pandemic hit the market sentiment as Nifty 50 and the S&P BSE Sensex recorded losses of 0.4 percent and 1.5 percent, respectively in April, and the rupee depreciated by 2.3 percent to reach 74.51 INR/USD in April.
  • This was mirrored by net FPI outflows of USD 1.18 billion in April.

Financial Condition of India according to FM report

  • Domestic financial conditions, however, remain comfortable with RBI’s liquidity support, with open market operations in 2020-21 with a turnover of ₹ 3.17 lakh crore.
  • The launch of G-SAP 1.0 is an important tool for further guidance towards stable and systematic management of the yield curve.
  • While overall financial conditions remained accommodative, the report said, credit growth continued to be muted at 5.3 percent as of April 9, 2021.
  • Sectorally, the report said, agriculture, medium industry, and trade services led the credit offtake in March, while credit to small and large industry and NBFC services remained subdued.
  • The easy financing conditions enabled the corporate sector to raise sufficient funds from the financial markets.
  • The latest data on corporate earnings signals a manufacturing turnaround in the fourth quarter of 2020-21, with 12.5 percent growth in net sales and a 9.5 percent rise in income for a sample of 213 companies, the finance ministry report noted.

Digital payments continued to gain momentum, with UPI transaction volume in April and more than double the level of the previous year.

CPI-combined inflation increased to 5.52 percent, mainly due to high food inflation. WPI inflation rose to an 8-year high of 7.39 percent, led by oil and metal prices as well as a base-effect, rising its CPI counterpart after nearly two years.

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