Second COVID-19 wave has hit demand harder, disrupted supplies: RBI

The Reserve Bank of India, in its May bulletin, says the second COVID-19 wave has hit demand harder and the disruptions on supply side have been limited in comparison to last year. The central bank has acknowledged the loss of lives and livelihoods to the second wave.

“The biggest toll of the second wave is in terms of a demand shock – loss of mobility, discretionary spending and employment, besides inventory accumulation, while the aggregate supply is less impacted,” it said. “India has a lot to live for; among them is the strong likelihood of being the world’s fastest growing economy in 2021 and 2022.”

The RBI said war efforts have been mounted to stop the second surge in its tracks. It listed all parts of the economy impacted by the second wave in varying degrees to form a U-shaped curve. The central bank acknowledges the two shoulders of the U denote agriculture and information technology. One has remained largely unaffected by the pandemic and the other has benefitted from it. The slopes show different segments from automated manufacturing to services that can be remotely offered that have seen different levels of impact.

“In the well of the U are the most vulnerable, blue collar groups who have to risk expose for a living and for rest of society to survive; doctors and healthcare workers; law and order; and municipal personnel; individuals eking out daily livelihood; small businesses, organized and unorganized, and they will warrant priority in policy interventions,” it said.

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The central bank has pointed out the fact that lockdowns have worked and the infection curve is flattening in select states, but it has also dented economic activity, but not debilitated it.