“We are not out of the woods yet as fresh (Covid-19) variants bring fresh concerns. This time around, we have additional insurance in the form of vaccines, people (largely) getting used to Covid protocols and one does not foresee the kind of lockdown we saw last year,” Das said at the Times Network India Economic Conclave 2021.
Experts have suggested that India may be undergoing its second wave of Covid-19 infections led by Maharashtra, where cases have doubled at an alarming rate. Several states where cases have seen a spike have resorted to localized lockdowns, raising concerns that the fragile recovery in the economy may be hamstrung if vaccine rollout does not pick up pace.
The government on Wednesday expanded the scope of its vaccine rollout to include all citizens above the age of 45 to accelerate inoculations that can help the country get closer to some kind of herd immunity. So far, India has inoculated over 50 million individuals but its daily vaccination rate needs to double to ensure that a sizable chunk of the population gets at least one jab by the end of the year.
The central bank in its February monetary policy meeting projected that India’s real economy could grow at a pace of 10.5 per cent in 2021-22, while suggesting that risk to inflation remains. Das said that GDP growth rate projections for next year may not require downward revision even though he accepted that spike in viral cases is a matter of concern.
Das also rebuffed suggestions that the central bank is currently in a fight with the bond market given its reluctance to accept the market’s demand for higher yield. The central bank has had to recently devolve some government bond auctions as market participants sought higher yields to factor in the avalanche of bond supply in the next fiscal year and rising threat of inflation.
“There is no fight between the central bank and the bond market. We are stressing on an orderly evolution of the yield curve and not sudden spikes. A disorderly evolution of bond yields will be an impediment to growth,” Governor Das said.
The yield on the benchmark 10-year government bonds have risen since the Budget as traders fear that the large supply of government papers, threat of higher inflation as the economy normalizes and increase in global bond yields will make it difficult for the central bank to keep yields suppressed.
Das has reiterated that the central bank remains committed to the smooth rollout of the government’s borrowing program and will continue to provide abundant liquidity in the system.