RBI report estimates a loss of ₹ 2 Lakh Crore to India’s economy following the second wave of COVID-19

The RBI report focused on the overall state of the economy, India’s sovereign yield curve and the fiscal framework of the country

RBI report estimates a loss of ₹ 2 Lakh Crore to India’s economy following the second wave of COVID-19
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The Reserve Bank of India, in its monthly bulletin for June 2021, has stated that the second wave of the coronavirus pandemic may result in an output loss of Rs. 2 lakh crore for this fiscal year.

The RBI said that demand from rural areas weakened as the virus spread to smaller cities and villages and region-specific containment measures were implemented. It observed that even as the second wave hit domestic demand hard, cautious optimism is returning.

According to a report by NDTV, through three articles, RBI has focussed on the overall state of the economy, India's sovereign yield curve and the fiscal framework of the country.

The RBI said that in a welcome change, aggregate supply conditions like agriculture and contactless services are holding up, while industrial production and exports have surged in comparison to last year- in regard to the state of the economy.

The central bank noted, "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 that the level of the yield curve has undergone a downward shift from the second quarter of 2019, which reflects the ultra-accommodative stance of monetary policy.


Talking about the fiscal framework and quality of expenditure, the report said that the pandemic necessitated an overwhelming fiscal response from governments globally.

The report factored in the revised GDP projection where it slashed growth from 10.5% to 9.5%. A report in the Times of India said that the projection had assumed that the GDP would rise by 18.5% in the first quarter of the fiscal year.

"As India unwinds the fiscal stimulus and embarks on the path of fiscal adjustment, it is necessary to emphasise on ‘how' over ‘how much'. This article proposes a few quantifiable indicators, i.e. ratios of revenue expenditure to capital outlay and revenue deficit to gross fiscal deficit along with threshold levels for them, that can be suitably blended into the fiscal fabric for a sustainable growth trajectory," the RBI bulletin has noted.

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