NEW DELHI: The economy showed signs of revival in June from the adverse impact of the Covid-19 second wave, but recovery was uneven with manufacturing and services sectors among the laggards while inflation remained a matter of concern, the finance ministry said in its latest monthly economy report.
“Recovery remains uneven with indicators such as port traffic, air traffic, PMI Manufacturing and Services demonstrating lagged revival from the impact of second wave. Latest industrial production estimates show sequential moderation in growth of India’s eight core industries at 16.8% YoY in May 2021, 8% lower than pre-Covid May 2019 level,” the report said.
However, it expressed optimism that recent policy measures will accelerate the pace of recovery. “Resilient tax collections of the Central Government in the first two months of FY 2020-21 and sustained momentum in capital expenditure, particularly in the road and rail sector, augurs well for pivoting targeted fiscal support for continued economic recovery,” it said.
Going forward, the ministry feels investment in flagship schemes will further enhance consumption. “Consumption sentiment is expected to pick up with further enhancement of employment support under Aatma Nirbhar Bharat Rozgar Yojana (ANBRY) and wider Bharat-Net digitisation coverage.”
But worries on supply side bottlenecks and inflation remained. “A positive price momentum cutting across food, fuel and core categories, along with an unfavourable base effect contributed to this rise in headline inflation. Inflation in rural areas at 6.48% was higher than in urban areas at 6.04% in May 2021,” the report pointed out, attributing it to rising global crude oil prices and a low base effect.
Recently, all core sub-groups registered a pick-up in inflation like in clothing and footwear, household goods and services as well as personal care items.
Crude rates may hurt inflation
Unlocking states with declining caseload would mitigate cost pressures. But rising global commodity prices could impact inflation, the report said
