Abhishek Raja
Economic activity has shown improvement since May-end, with a robust recovery in sectors
AnSBI Research report titled “Covid-19: The race to finishing line” warns of a third wave from August 2021 with a peak in September.The report says full vaccination is the only saviour.
At the time of writing, six per cent of India's population is fully vaccinated while 24 per cent have had the first dose. The figure is low compared to other countries, such as the US (47.1 per cent), the UK (48.7 per cent), and Israel (59 per cent). The devastating second wave is “not yet over in the country and is exhibiting a fat tail”.
India has started giving over 40 lakh vaccination doses daily. Rajasthan, Delhi, Himachal Pradesh, Kerala, and Uttarakhand have given both doses to a large section of the population above 60 years. Tamil Nadu, Punjab, Uttar Pradesh, Assam, Bihar, and Jharkhand have vaccinated a smaller proportion of those above 45 years, according to the report. The pace is slower in the rural areas, it says.
Indian households are facing financial stress and the ratio of GDP to debt has risen sharply. The SBI Research reported that the ratio rose to 37.3 per cent in fiscal 2021, up from 32.5 per cent the previous year. It expects the situation will worsen due to a decrease in bank deposits in FY21 and rising health spending, which would increase household debt.
According to the report, the decline in bank deposits is indicative of a decrease in household financial savings rates. Fiscal policy action is needed as India's income from wages as a percentage of GDP has fallen to 30.6 per cent in FY21 from 34.1 per centin FY20. The profit after tax of Indian industry as a percentage gross value added has increased significantly to 23.7 per cent in FY21 from 13.4 per cent in FY20.
States with high per capita GDP have been associated with higher Covid-19 deaths per million while low per capita GDP are associated with low Covid-19 deaths.
High per capita states like Maharashtra, Kerala, Karnataka, Tamil Nadu, Uttarakhand witnessed high deaths per million while lesser deaths were reported in low per capita states like Bihar, Jharkhand, UP, Assam, Odisha, and Rajasthan.
Economic activity has shown improvements since May-end, with a robust recovery in weekly vegetable arrivals, revenue collection at regional transport offices, and the Apple Mobility Index, despite a declining labour participation rate, the report said.
The second wave coupled with lockdown pushed manufacturing in the reverse gear as PMI for June dipped to 48.1. Services havethe maximum share in India's Gross Domestic Product (GDP) with over 57 per cent contribution. Manufacturing had a share of around 17 per cent of GDP. Both sectors faced job losses and this means nearly two-thirds of the economy was not in a good shape in the April-June quarter.
India's services activity plummeted to an 11-month low, contracting for the second consecutive month in June and indicating that services firms have taken further losses due to the cautious consumer sentiment despite the easing of the lockdown in some states. Business activity and new orders decreased in four out of the five broad areas of the service economy, with the fastest rates of contraction registered in consumer services. In line with a further reduction in new work intakes, companies lowered payroll numbers midway through 2021. The decline in jobs was widespread across the five monitored sub-sectors.
India has to vaccinate everyone and people have to follow guidelines to safeguard us from the third wave. We have lost enough in the second wave and the economy has suffered a lot. It is time for better days ahead.
(The writer is a GST specialist and analyst. The views expressed are personal.)
