Slow Vaccination Rate: A Sword of Damocles over the Economy

The most recent numbers on the gross domestic product (GDP) growth in the fourth quarter and for the whole of 2020–21 highlight the crawling pace of the recovery and the devastating impact of COVID-19 on the economy in the first year of the pandemic. Though the marginal pickup in growth from 0.5% in the third quarter of 2020–21 to 1.6% in the fourth may provide a little comfort to policymakers, the positive signals are far too muted to provide much desired respite.

Numbers on the demand side show that though the slow pickup in growth in the fourth quarter of 2020–21 was mostly on account of a mild revival of both private and government consumer expenditures, which account for around 55% and 10% of the overall demand in the economy; the slow 2.7% recovery in private consumption points to the persisting demand deficit in the economy. Similarly, though the pickup in investments has now prolonged across two quarters, in both fixed capital and also in that of valuables, it remains considerably skewed. This is because the growth of investment in valuables is almost tenfold higher than that of investments in fixed capital. Such highly skewed pickup in both consumption and investment demand only underlines the fragile nature of the incipient recovery.