Finance Ministry: Mission mode vaccinations and frontloading fiscal measures key to India’s recovery: Finance Ministry

Mission mode vaccination and frontloading of fiscal measures planned in the budget hold the key to India’s invigorating investment cycle, a finance ministry report said Wednesday, warning that the second wave of pandemic has posed a downside risk to recovery.

It said accelerated vaccination was imperative to avoid or lower the ferocity of subsequent waves and economic activity is inextricably linked to the path of pandemic.

“A ramp up in the pace and spread of vaccination on a war footing is critical to help India restrain the impact of the pandemic,” it said, recommending a target of vaccinating at least 700 million with the first dose by September.

This would help in achieving herd immunity, defined as 75-80% of the population aged 18 and above, which in turn would boost consumer and producer confidence and reinvigorate the of economic growth, the ministry said.

As of date, 192 million people had received their second dose while 47 million people were fully vaccinated.

“With around 120 days to 31st September 2021, around 9.3 million vaccinations are required per day to achieve herd immunity,” the report said.

To achieve this target, “a process may be created to send alerts for instant appointments for leftovers/ no shows will enable reduced wastages and efficient usage of the supply available,” the report suggested.

It also recommended longer shifts at vaccination centres and setting up mass vaccination sites at shopping areas and drive-ins.

Second wave slowdown

The provisional growth estimates for the previous quarter at 1.6% confirmed a V-shaped recovery in the second half of FY21, it said.

“This momentum of economic recovery has, however, been moderated by the ravaging second wave of COVID-19,” the report said.

The ministry noted that there was a sequential slackening in a host of indicators in May ranging from the output of eight core industries and auto sales to the services purchasing managers’ index and Goods and Services Tax (GST) collections.

However, with the restrictions being more adaptive to learnings from the first wave, manufacturing and construction activities were expected to experience a softer economic shock in the ongoing quarter, it added.

Going forward

GST e-way bills and foreign portfolio investment flows witnessed an uptick in the second half of May, the report said, while the agriculture sector remained in a comfortable position with a normal monsoon forecast, smooth food procurement and distribution, and the rural employment guarantee scheme.

This would have a favourable impact on retail inflation, although it remained vulnerable to upward pressures from high international commodity prices and logistics costs across manufacturing and services, it said.

The government was banking on capital expenditure to drive growth, with government capex showing a sharp 66.5% annual improvement in April.

“This will be pivotal in bringing back the economy on a high growth trajectory, thereby facilitating buoyant revenues and a sustainable fiscal path in the medium term,” the ministry said.