Speed, scale of Covid vaccination to shape economic recovery path: RBI report

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June 16, 2021 9:14 PM

As per the current assessment, the second wave of the pandemic has mainly hit the domestic demand, the RBI said in an article on the ‘State of economy’ written jointly by RBI Deputy Governor M D Patra and other officials.

The start of policy normalisation will remain contingent on a sustained growth recovery, evidence of which is unlikely to be visible before the end of the current fiscal year, he added.The start of policy normalisation will remain contingent on a sustained growth recovery, evidence of which is unlikely to be visible before the end of the current fiscal year, he added.

Speed and scale of vaccination against COVID-19 will shape the path of economic recovery which has the resilience and the fundamentals to bounce back from the pandemic and unshackle itself from pre-existing cyclical and structural hindrances, said a RBI report.

As per the current assessment, the second wave of the pandemic has mainly hit the domestic demand, the RBI said in an article on the ‘State of economy’ written jointly by RBI Deputy Governor M D Patra and other officials.

Observing that vaccines by themselves will not end the pandemic, the article said, “we have to learn to live with the virus, complementing vaccines with ramping up investment in healthcare, logistics and research. The pandemic is a real shock with real consequences. Hence, there is a need to ensure that the recovery is built on a solid foundation of business investment and productivity growth.”

The Indian economy, it added, continues to wrestle with the second wave of the pandemic, though cautious optimism is returning.

Authors of the article include RBI Deputy Governor Michael Debabrata Patra. The central bank, however said views expressed in the article are those of the authors and do not necessarily represent the views of the Reserve Bank of India.

On the brighter side several aspects of aggregate supply conditions – agriculture and contactless services are holding up, while industrial production and exports have surged amidst pandemic protocols, it said.

“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,” the article said.

The article notes that the finance ministry estimates that in order to achieve herd immunity and regain the momentum of the economic recovery, the target population to be vaccinated is 70 crore by September 2021 and around 113 crore more doses are needed; accordingly, around 93 lakh vaccinations are required per day to achieve the herd immunity. While the peak daily vaccination rate attained till date is 42.65 lakh, “doubling the shifts and possibly vaccinating 24×7 for a couple of months can enable the ambitious, but possible, throughput of 1 crore shots a day”, as per the Monthly Economic Review (May 2020), Department of Economic Affairs, Ministry of Finance.

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