India's central bank in its monthly bulletin for June 2021 said the second wave of COVID-19 pandemic may result in a loss of 27.11 billion U.S. dollars in output during the current financial year.
The Reserve Bank of India (RBI) has observed that the Indian economy continues to wrestle with the second wave of the COVID-19 pandemic even though cautious optimism is returning. It has assessed that the second wave has basically hit domestic demand hard.
"For 2021-22, the Reserve Bank has projected real GDP growth of 9.5 percent on the assumption that the impact of the second wave will be contained in the first quarter of the year in which strong base effects from last year's precipitous contraction will come into play," reads the report.
"Real GDP may hence grow by 18.5 percent in the first quarter, slowing to 7.9 percent in the second quarter, 7.2 percent in the third quarter and 6.6 percent in the last quarter of the year as base effects slowly wane," the report added.
"The impact of the second wave is hence estimated at about 2 lakh crore of lost 2021-22 output. By current assessment, the second wave's toll is mainly in terms of the hit to domestic demand on account of regional and specific containment rather than a nation-wide lockdown. Moreover, this wave has fanned into smaller cities and villages, sapping rural demand," the report said.
In its monthly bulletin, released on Wednesday, the central bank focused on the overall state of the economy, India's sovereign yield curve and the fiscal framework of the country, in the form of three articles.
Commenting on the state of the economy, the central bank said that while the second wave has hit domestic demand, on the brighter side, several aspects of aggregate supply conditions, agriculture and contactless services are holding up, while industrial production and exports have surged compared to last year amidst pandemic protocols.
"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 report said.
As for life beyond the pandemic, the report highlights the advantages of repurposing and reprioritizing revenue and expenditures to extract "bang for the buck." The report said that the public sector can lead the private sector in unlocking growth opportunities. In addition, it can partner the private sector, and step back to allow the private sector to take the lead in sunrise areas.
The report, authored by RBI deputy governor M. D. Patra, highlights the finance ministry estimates that to achieve herd immunity and regain recovery momentum, the target population to be vaccinated is 700 million by September 2021 and around 1.13 billion more doses are needed. Accordingly, around 9.3 million vaccinations are required per day to achieve herd immunity.