Amid a severe second COVID wave, Ministry of Finance feels that the economic impact may not be as serious as was in 2020. Our GDP may take a hit of one percent as lockdown is being applied in few states and that it is not pan India.
According to Ministry of Finance, based on its economic review for April, 2021,the second wave of COVID 2019 is on and it poses a downside risk to economic activities in first quarter of FY 2020-21 (ie, April – June 2021 ). It is likely to have a muted economic impact as compared to COVID -19 first edition in 2020 . Many rating companies and other agencies have also now echoed the similar views and as a result, GDP projections for 2022 are being downgraded.
The FY 2020-21 closed recently resulted in higher indirect tax collection (Customs, Central Excise and GST ) to the tune of 8.2% higher than the revised estimates (RE ) and 12.3 % higher than 2019-20 collections.given the fact that 2020-21 was an unusual year, this collection is Infact encouraging . Not only this, imports rose by 166 % and 7 % respectively over 2020 and 2019. Similarly, grew by 197 % and 16% over 2020 and 2019 respectively . While these figures may sound like music to ears,we cannot brush aside the likely loss of lives, businesses and the economy as a whole in COVID second phase and the likely third wave in offing. How many more waves are in store, it could be anybody’s guess .
Though fiscal position of Government improved with widespread economic activities in October ,2020- March ,2021, which is also reflected by tax collections , yet from April ,2021 onwards, second wave of COVID has resulted in partial lockdowns in the country and consequent imposition of restrictions over economic activities. With rapid spread of COVID , many states have imposed partial or total lockdown or curfew on all businesses and social activities. At the same time, higher health risk has also posed challenges with cost of health care infrastructure mounting up as well as very high number of fatalities resulting in loss of lives.
The two silver linings appear to be Indian experience of learning to operate and live with COVID coupled with introduction of largest vaccination project being undertaken now. The results may show few weeks down the line.