The detriment of the COVID-19 second wave is in terms of a “demand shock”, the Reserve Bank of India (RBI) said on May 17.
The central bank has mentioned in its monthly bulletin, the resurgence of Covid-19 has “dented but not debilitated” economic activity in the 1.5 months of the Q1 of FY 2021-22.
The ferocious second wave has “overwhelmed India and the world”, the RBI stated. It said, “war efforts” have been mounted to stop the second surge in its tracks.
“Real economy indicators moderated through April-May 2021. 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,” the Reserve Bank said.
Though the pandemic has badly hit the economic activities, the impact of COVID-19 second wave is not as severe and adverse as compared to the same period last year, the central bank suggested.
“Resurgence of COVID-19 has dented but not debilitated economic activity in the first half of Q1: 2021-22. Although extremely tentative at this stage, the central tendency of available diagnosis is that the loss of momentum is not as severe as at this time a year ago,” said the bank.
“Although extremely tentative at this stage, the central tendency of available diagnosis is that the loss of momentum is not as severe as at this time a year ago,” it said.
Analysing the performance of non-banking financial companies (NBFCs) in the pandemic times, the apex bank said that NBFCs played an integral and essential role in the country’s financial intermediation space by accompanying bank credit, undertaking niche financing and promoting financial inclusion.
The RBI also noted that NBFCs in the retail loan sector “stayed ahead of the curve” in assistance wby their relatively low delinquency.
“Profitability of the sector improved marginally in Q2 and Q3:2020-21 asNBFCs’ expenditures registered a steeper fall than income. The asset quality of NBFCs improved in Q2 and Q3:2020-21, vis-à-vis Q4:2019-20, on account of regulatory forbearance to mitigate the impact of COVID-19,” it further said.