Economic recovery fragile due to Covid-19, states’ lockdowns: FinMin

India is well on the path to a recovery from a trough in April, says Ministry report

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Economic recovery | Finance Ministry | Coronavirus

India’s economic recovery remains “fragile” due to rising number of coronavirus cases and states “intermittently” ordering lockdowns to contain the disease, said the Finance Ministry on Tuesday about July.

The government issued on July 30 guidelines for the third phase of lifting curbs imposed to stop the spread of the coronavirus disease, removing night curfew outside containment zones and allowing gyms and yoga centres to reopen from August 5. The guidelines said that schools, colleges, theatres, swimming pools, metro rail, cinema halls and bars will remain closed.

States are free to impose their own restrictions and till July 24 at least 14 of them had announced localised lockdowns to tackle the spread of the virus.

“It is evident that, India is well on the path to a recovery from a trough in April, ably supported by proactive government and central bank policies. However, the increase in the Covid (Covid-19) cases and subsequent intermittent lockdowns make the recovery prospects fragile and call for constant and dynamic monitoring,” said the ministry’s Monthly Economic Report, referring to the disease caused in the pandemic.

It said that recovery is linked to how Covid-19 infections evolve across states. “India’s top 12 growth driving states account for 85 per cent of the Covid-19 case load, with 40 per cent of confirmed cases concentrated in the top two growth drivers i.e. Maharashtra and Tamil Nadu,” the report said.

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As India unlocked, active Covid-19 cases reached 5.6 lakh by July-end, growing month end-on-month end at 166 per cent as compared to June, the report stated. The highest growth in active cases in July was in Karnataka, Andhra Pradesh and Jharkhand.

As of Tuesday afternoon, India had the third highest number of confirmed cases worldwide at 1.85 million. The Ministry of Health and Family Welfare’s data showed that 586,298 cases were active cases and 38,938 people had died of the disease.

The report said that the worst for the economy seemed to be over as high frequency indicators showed a recovery in June compared to May and April. Indicators include goods and service tax (GST) collections, electricity consumption, rail freight and passenger data, petrol and diesel consumption, and highway toll collections.

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It said that the push for growth in coming months appears to be pitched in rural India, and will be helped by the recent reforms announced in agricultural sector, including two ordinances helping farmers trade across state lines. India has witnessed record procurement and production of food grains as the rabi crop harvesting gets over and kharif sowing begins.

“Urban India and the world at large, however, continue to fight the growing menace of the pandemic, simultaneously on the health and economic front,” the report said.

“In its June 2020 update, the International Monetary Fund (IMF) has projected global output to contract by 4.9 per cent in 2020, while OECD’s projections are harsher at 7.6 per cent. GDP figures of April-June quarter of 2020, slated to be released towards end of August, will throw some light on the expected recovery of the Indian economy,” it said.