India’s economy recovered despite 3 COVID-19 waves, says US Treasury report
“India’s rapid second wave weighs heavily on growth until mid-2021, delaying its economic recovery”
“India’s rapid second wave weighs heavily on growth until mid-2021, delaying its economic recovery”
The Indian economy has made a strong comeback despite three significant COVID-19 waves, the US Treasury said in a report to Congress.
India’s rapid second wave weighed heavily on growth until mid-2021, delaying the economic recovery, the Treasury said in a semi-annual report.
The Treasury on Friday praised India’s immunization efforts, saying, “However, as India’s vaccination rollout accelerated, there was a strong jump in economic activity in the second half of the year.”
By the end of 2021, about 44% of India’s population was fully vaccinated, it said.
After contracting seven per cent in 2020, production returned to pre-pandemic levels by the second quarter of 2021, with a full year growth of 8% in 2021, it added.
Since the beginning of 2022, India suffered a third major outbreak driven by the Omicron edition, but the number of deaths and the wider economic fallout are limited, it said.
The Indian government will continue to provide financial support to the economy in 2021 against the backdrop of the pandemic, it said. Officials estimate the total fiscal deficit for the 2022 fiscal year to reach 6.9% of GDP, which is higher than the pre-pandemic deficit, it said.
According to the Treasury, the Reserve Bank of India kept its key policy rates unchanged at 4% from May 2020, but in January 2021 it gradually eased extraordinary liquidity measures designed to support growth during the early part of the coronavirus pandemic. started opening.
After recording a current account surplus of 1.3% of GDP in 2020, its first surplus since 2004, India returned to a current account deficit of 1.1% of GDP in 2021.
The return to the current account deficit was driven by a sharp decline in India’s trade deficit, which widened to $177 billion in 2021 from $95 billion in the previous year.
In addition, goods imports grew particularly sharply in the second half of 2021 amid economic recovery and rising commodity prices, especially energy prices, leading to a 54% year-on-year increase in imports in 2021.
India’s exports also grew in 2021, albeit at a lower rate than imports, increasing by 43%, it said.
It said India’s services trade surplus (3.3% of GDP) and income surplus (1.3% of GDP) partially offset the wider goods trade deficit.
Remittances grew nearly 5% in 2021, reaching $87 billion, or 2.8% of GDP, it said, estimating the Treasury that in 2021, India’s external position was broadly in line with economic fundamentals and desirable policies, including There was an estimated current account gap. 0.3% of GDP.
According to the report, India’s bilateral trade surplus with the United States has grown significantly in the last one year. Between 2013 and 2020, India ran a bilateral goods and services trade surplus of about $30 billion with the United States.
In 2021, the trade surplus of goods and services reached $45 billion, a physical increase from $34 billion in the four quarters to December 2020. India’s bilateral goods trade surplus reached $33 billion (up 37%), while the bilateral services surplus increased to $12 billion. (29%) in 2021.
The Treasury said the expansion is primarily driven by increased US demand, particularly for goods, as the US economy recovers strongly in 2021.