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June 15, 2021

The second wave of COVID-19 (in 2021) has spread rapidly worldwide, especially in India, Latin America and the European countries. The global best practices focused on localising mini-containment zones, restricting movement, strengthening health infrastructure and accelerating vaccination drive. In April 2021, the average transmission rate of COVID-19 virus was observed to have dropped in countries with high vaccination rates.

Recognising vaccination as a key pillar of the ‘rapid testing, follow-up, treatment and COVID-19 appropriate behaviour’ strategy, the government started Phase III of the vaccination drive for the 18–45 age group in May 2021. To accelerate the pace of vaccinations for all age groups across states, the government relaxed vaccine access and pricing.

In April 2021, economic recovery moderated due to impact of the second wave of COVID-19; however, outlook for FY22 performance remains favourable considering most high-frequency indicators continued to record growth in FY21 amid COVID-19 challenges.

  • For FY22, the government has set a food grain production target at 307.31 million tonnes, an increase of 1.3% YoY, driven by the projected ‘normal’ monsoon.
  • Given the rebound of COVID-19 in its second wave, the government decided to distribute food grains to ~80 crore beneficiaries covered by the National Food Safety Law of 2013. It offered an additional 5 kg of grains per person per month over and above the regular monthly supplies of food grains for May and June 2021 under the Pradhan Mantri Garib Kalyan Anna Yojana (PM-GKAY).
  • In FY21, the Indian government announced PMGKAY-I (April–June 2020) and PMGKAY-II (July–November 2020), under which the FCI (Food Corporation of India) provided 104 LMT wheat and 201 LMT rice to their respective state governments/union territories (UTs).
  • Employment demand under the Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS) improved significantly, with 21.2 crore man-days of work (a 50% YoY increase) recorded under the scheme in April 2021.
  • In April 2021, the Manufacturing Purchasing Managers' Index (PMI) in India stood at 55.5, improving from 55.4 in March 2021, indicating favourable prospects for the domestic manufacturing sector.
  • Power consumption increased 40% in April 2021, indicating sustained industrial and commercial activities.
  • In March 2021, strong demand renewal continued, with sales of passenger vehicles and two- and three-wheelers increasing by 115% and 71%, respectively.
  • An increase in port traffic and railway freight was recorded, indicating higher industrial development. In March 2021, port traffic grew 16.4% for the fifth month in a row, reflecting sustained expansion of economic activities. In April 2021, railways recorded >10% increase in freight loading.
  • Gross GST collections stood at Rs. 141,384 crore (US$ 19.41 billion) in April 2021.
  • As per the provisional data for FY21 on indirect tax collections, net revenue collection stood at Rs. 10.71 lakh crore (US$ 147.03 billion), an increase of 12.3% YoY.
  • E-way invoices is a leading indicator of tax, supply chain correction and logistics growth. Since May 2020, continued recovery of interstate freight transportation has laid a good foundation for economic recovery.
    • In April 2021, 5.8 crore e-way bills were issued. In terms of value, e-way bills generation reached Rs. 17.36 lakh crore (US$ 238.33 billion) in April 2021 as against Rs. 3.9 lakh crore (US$ 53.54 billion) in April 2020.
  • In the fourth quarter of FY21 (as of May 2, 2021), earnings of 213 companies indicated a 15% increase in total sales of the corporate sector, highlighting recovery prospects in the manufacturing industry.
    • In the fourth quarter of FY21, income and net sales of these 213 companies increased YoY by 9.5% and 12.8%, respectively.
  • In FY21, UPI digital transactions were valued at Rs. 41.0 lakh crore (US$ 562.88 billion) compared with Rs. 21.3 lakh crore (US$ 292.42 billion) in FY20. In April 2021, UPI transactions were valued at Rs. 4.93 lakh crore (US$ 67.68 billion)—recording >3x YoY growth. Also, in terms of volume, UPI transactions increased to 264 crore—more than 2x the volume in April 2020.
  • In April 2021, the Indian basket of crude oil reached US$ 63.1 a barrel, compared with the average crude oil price of US$ 64.8 a barrel in March 2021, due to the demand build up amid vaccination optimism.
  • In April 2021, merchandise exports increased to US$ 30.2 billion (at 197.0% YoY growth), driven by strong performance from key sectors such as electronic goods, gems & jewellery, engineering, petroleum products, jute, carpet, handicrafts, leather, oil meals, cashew, marine products and chemicals.
  • The RBI (Reserve Bank of India) has conducted open market purchases worth Rs. 3.13 lakh crore (US$ 42.97 billion) in FY21 and Rs. 25,000 crore (US$ 3.43 billion) in April 2021 to maintain sufficient liquidity in the system.
  • Daily net liquidity absorption under the liquidity adjustment facility (LAF) averaged at Rs. 5.8 lakh crore (US$ 79.63 billion) in April 2021.
  • In FY21, foreign portfolio investment (FPI) inflows in India stood at US$ 36.2 billion (the highest in a decade after FY15).
  • As of April 23, 2021, India's foreign exchange reserves stood at US$ 584.11 billion.

To ensure sufficient liquidity support in India’s economic growth, the RBI announced (on April 7, 2021) its plan to extend the TLTRO (Targeted Long-term Repo Operations) on Tap programme for six months until September 30, 2021 and allocate Rs. 50,000 crore (US$ 6.86 billion) to the All-India Financial Institutions (AIFIs) for FY22.

In addition, the RBI announced new measures on May 5, 2021, as part of a comprehensive calibration strategy for the second wave. These measures are as follow:

  • Provision of regular liquidity facilities of Rs. 50,000 crore (US$ 6.86 billion) to give access to emergency medical services.
  • Special long-term repurchase business (SLTRO) of small financial banks (SFB) for Rs. 10,000 crore (US$ 1.37 billion).
  • Loans by Small Finance Banks (SFBs) to MFIs for on-lending delegated Priority Sector loans, boosting credit to MSME entrepreneurs.
  • Resolution framework 2.0 for stress assets related to individuals, small businesses and MSME's COVID-19 challenges.
  • Rationalise compliance with KYC requirements for the convenience of customers.
  • Use floating clauses and counter cycle term buffers and ease state government overdraft limits.

The final budget for FY22 announced by 17 states and UTs indicates an increase of 9.7% in capex expenditures from the FY21 reviewed estimates. Growth in capex expenditure is expected to stimulate revenues and return the economy to high-growth trajectories.

The 28th round of services and infrastructure outlook survey (SIOS) conducted by the RBI, from January to March 2021, indicated the respondent’s optimism for commercial state and employment conditions for the first and third quarters of FY22. Infrastructure companies also indicated an optimistic outlook for the fourth quarter of FY21 and estimated quick growth in the overall situation of the business.

Note: Conversion rate used for May 2021 is Rs. 1 = US$ 0.014


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