FinMin confident of combating downside risk amid rising Covid-19 cases

The finance ministry on Monday said the country was equipped -- on the strength of the vaccination drive and the government’s management of the pandemic -- to combat any downside risks posed by the recent surge in Covid-19 cases.

The ministry’s Economic Affairs Department, in its monthly report, said the capital expenditure (capex) cycle was in motion, and its signs would be seen in the second half of the year.

The confidence has come at a time when the country is seeing an exponential rise in Covid cases.

“As the vaccination drive continuously upscales in India and guided by the learnings of India’s successful management of pandemic during its first wave, India is now well armed to combat any downside risk posed by the recent surge in Covid-19 cases. With the end of a challenging FY 2020-21, the crest of a brighter and self-reliant FY 2021-22 awaits India,” the report said, adding, despite the surge in cases, recovery was resilient with a sustained improvement in a majority of high-frequency indicators.

The Budget has provided a strong fillip to the capex momentum with emphasis on infrastructure investment as a key sector to revive demand and growth, according to the report.

The ministry stated that India had been able to delay the onset of the second wave. The gap between the first peak and the start of second wave has been 151 days in India while it is much lower in other countries, it said.

As far as economic activities are concerned, the country has adapted itself to the pandemic. This prospect is further bolstered by the roll-out of vaccination.

Besides, India is emphasising a five-fold strategy to curb the tide of new cases -- increase in testing; effective isolation and contact tracing of those infected; re-invigorating public and private health care; ensuring Covid-appropriate behaviour (CAB); and a targeted approach to vaccination in districts reporting large numbers.

Noting that the purchasing managers’ index (PMI) for manufacturing indicated a loss of momentum in March as compared to February, the report highlighted the sector continued to improve sharply, outpacing the long-run series average, with firms scaling up production and witnessing an upturn in sales.

It highlighted things such as strengthening demand, monthly goods and services tax collection touching a record in March, the growth momentum in rail freight traffic, port cargo traffic increase, and domestic aviation getting better.

The digital payment upsurge too continues unabatedly, the report said.

It said setting up the National Bank for Financing Infrastructure and Development, aiming to achieve a lending of Rs 5 trillion in three years to infrastructure projects, was a prime measure.