Finance Ministry wants COVID-19 vaccination drive to be boost for steady economic growth momentum

A Finance Ministry report has urged for the COVID-19 vaccination drive to be stepped up to cover a population of 70 crore by September. This, it says is essential to get the economic growth momentum.

Before the second wave of infections struck, India’s gross domestic product (GDP) grew 1.6% in the fourth quarter (January-March) of 2020-21. For the full financial year 2020-21, however, the GDP contracted 7.3% – a record low. As such, the Finance Ministry noted that quickening the pace and coverage of vaccination is critical to help India heal and regain the momentum of economic recovery.

In its latest monthly economic report, the Ministry stated that the momentum of economic recovery has been moderated by the ravaging second wave of COVID. “Unlike the first wave, the effect of the second wave has been asynchronous it its onset across states and wider in its spread as the second wave also entered the rural hinterland. This necessitated at differentiated, state-level policy response in close coordination with the Central Government for rapid rebooting of health infrastructure.”

It highlighted that the world’s largest vaccination drive is underway in India with 23.9 crore doses administered as on date. To avoid or lower the ferocity of subsequent waves, an accelerated vaccination drive is imperative. Vaccinating to achieve herd immunity (75-80% of the population) will boost consumer and producer confidence and reinvigorate the engines of economic growth.

“Herd immunity is accomplished when 80% of the population is immune or less susceptible to infection. The key to regain the momentum of economic recovery is attainment of herd immunity at the earliest possible,” the ministry’s latest monthly economic report said. However, it noted the challenges pertaining to vaccine supply, vaccine hesitancy, operational aspects to achieve high daily coverage. The Ministry said widespread reach must be anticipated and planned for in advance.

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The Ministry pointed out that manufacturing and construction are expected to see softer economic shock in the current quarter. And the agriculture sector is showing good prospects, but high frequency indicators show slackening. “The agriculture sector continues to offer comfortable prospects amidst a normal monsoon forecast, smooth food procurement and distribution, and MGNREGA employment,” it said. “However, sequential slackening was observed in eight crore industrial output, PMI manufacturing, steel consumption, auto sales, tractor sales, petroleum products consumption, rail freight, port and air traffic, PMI services, highway toll collections, GST collections and UPI transactions.”

Pointing to the global inflation situation in the wake of rising commodity prices, the finance ministry analysis also cautioned that a prolonged rise poses a threat to investor sentiment and global financial stability.