Rising Covid cases, lockdowns hit revival prospects: DEA (Lead)

The prospects of economic recovery have become fragile in the wake of rise in coronavirus cases and the intermittent lockdowns, according to a Department of Economic Affairs (DEA) report, released here on Tuesday.

The monthly economic report for July said although India was on the path to recovery on the back of support from the government and the Reserve Bank of India (RBI), constant and dynamic monitoring of the situation was required to maintain the momentum.

“The increase in Covid-19 cases and subsequent intermittent lockdowns make the recovery prospects fragile and call for constant and dynamic monitoring,” it said.

With major indicators showing improvement, the worst for the economy seemed to be over, it said.

The report cited the Index of Industrial Production (IIP), Purchasing Managers Index (PMI), power generation, production of steel and cement, railway freight, traffic at major ports, e-way bill generation, among others to show that economic activities had picked up.

“With India unlocking, the worst seems to be over as high frequency indicators show an improvement from the unprecedented trough the economy had hit in April,” it said.

According to the report, the push for growth in the coming months will come from rural India. With the forecast of a normal monsoon, agriculture was likely to cushion the shock of the pandemic on the Indian economy in the current financial year (2020-21), it said.

The “timely and proactive” exemptions from Covid-induced lockdowns to the farm sector facilitated uninterrupted harvesting of rabi crops and enhanced sowing of kharif crops, it added.

“The record procurement of wheat has enabled flow of around Rs 75,000 crore to the farmers, which will boost private consumption in rural areas. Since September 2019, the terms of trade have moved in favour of agriculture and reinforced rural demand,” the report said.

It had manifested in an increase in rural core inflation between March and June, said the monthly economic report.

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