Economic

Division

Monthly
Economic
Review

June
2021
 Abstract

Global economic growth continued its upward trajectory in June 2021. Falling COVID-19
infections and accelerating vaccinations consolidated US recovery and renewed growth
prospects in the Euro Area. Global trade remained buoyant with uptick in global commercial
flight and port activity which portends well for Indian exports. However, resurgence of delta
variant infections, firming inflationary pressures, unequal access to vaccination and
burgeoning debt levels continue to lend substantial uncertainty to the global economic outlook.

On the domestic front, the Indian economy is showing signs of revival from the impact of the
COVID-19 second wave on the back of targeted fiscal relief, monetary policy measures, and a
rapid vaccination drive. The broad-based economic relief package, extended to mitigate the
second wave, amounted to ₹6.29 lakh crore. RBI continues with its efforts to calm the nerves
of the market and revive sectors with both backward and forward linkages and multiplier
effects on growth. With rapid and focused COVID-19 vaccination efforts, India’s average daily
vaccination rate in June 2021 has doubled to 41.3 lakh doses compared to 19.3 lakh in May,
crossing the 36 crore mark in its cumulative vaccination coverage. By June end, 78 per cent of
districts achieved COVID-19 test positivity rate below 5 per cent, thereby fostering conditions
conducive for easing of restrictions and restoration of economic activities. Going forward,
further expansion of vaccination and strict adherence to COVID-appropriate behaviour will
be a critical safeguard against emergence of a possible third wave.

As daily COVID-19 cases and deaths have ebbed since the second half of May 2021, the
recovery momentum in several high frequency indicators has accelerated. India is on the move
again with total volume of e-way bills rising by 37.1 per cent in June 2021 over May 2021 and
26 per cent YoY. This augurs well for GST collections in subsequent months. This is also
mirrored in google mobility indicators with grocery activity returning to pre-COVID levels
and retail and recreation activity showing sequential uptick. Power consumption growth
improved to 4.5 per cent sequentially in June 2021 over May and 8.4 per cent YoY, albeit
staying slightly below pre-COVID 2019 levels. Rail freight continues to sustain its momentum
with freight loading higher by 11 per cent in June 2021 compared to June 2019 and 20 per
cent higher compared to June 2020.

While localized lockdowns and mobility restrictions dented automobile sales in May 2021, June
data on vehicle registrations depict revitalisation of demand as states unlock. Highway traffic
movement – as measured by toll collections – also witnessed uptick in June 2021, thereby
indicating resumption of commercial activity. UPI transactions have rebounded to hit a record
high of ₹5.47 lakh crore in June 2021. Healthy monsoon coverage, water reservoir levels and
MGNREGA employment bodes well for rural sector’s resilience. However, recovery remains
uneven with indicators such as port traffic, air traffic, PMI Manufacturing and Services
demonstrating lagged revival from the impact of second wave. Latest industrial production
estimates show sequential moderation in growth of India's eight core industries at 16.8 per
cent YoY in May 2021, 8 per cent lower than pre-COVID May 2019 level.

1
Inflationary pressures took an upturn in May 2021 with headline inflation (CPI-C) and WPI
inflation touching a high of 6.3 percent and 12.94 per cent respectively. Supply side
disruptions in states and unfavourable base effects drove the broad-based momentum in retail
inflation across food, fuel and core categories. On the other hand, electricity and manufactured
products inflation led the uptick in wholesale inflation. Healthy monsoon coverage, gradually
rising Kharif sowing and unlocking of states is expected to ease food, and thereby headline,
inflation. However, risks due to global demand-led recovery in commodity prices and input
cost pressures remain.

Financial markets continue to derive comfort from the accommodative monetary policy stance
and RBI’s policy matrix of conventional and unconventional measures. G-Sec yields and
corporate bond yields remained broadly stable in June with marginal mid-month hardening
owing to high inflation prints. While equity markets remained range bound in June, net assets
under management (AUM) of mutual funds increased to an all-time high of Rs. 33.1 lakh crore
by end May 2021, a rise of 2.1 per cent over April 2021. Growth in bank credit continues to be
supported by agriculture and retail segment as well as disbursements under the ECLGS
scheme. The recent additional measures by Government to mitigate pandemic related stress,
especially in healthcare, travel and tourism and among the rural poor, are expected to improve
credit offtake.

Amid continuing foreign portfolio and direct inflows, net spot dollar purchases and rising
crude and dollar index, Indian rupee depreciated marginally by 0.2 percent in June 2021 over
May 2021 and stood at USD/INR 73.36. India’s foreign exchange reserves increased to enter
USD 600 billion plus territory, acting as a critical cushion against possible US stimulus exit
driven hot money outflows. Policy support for export insurance under the current economic
relief package adds further resilience to India’s external sector characterized by rising exports
and relatively low external debt burden.

Resilient tax collections of the Central Government in the first two months of FY 2020-21 and
sustained momentum in capital expenditure, particularly in the road and rail sector, augurs
well for continued economic recovery driven by capital expenditures. The recently announced
economic relief package is expected to further oil the wheels of the capex cycle via
implementation of the PLI scheme and streamlining of processes for PPP Projects and Asset
Monetization. Consumption sentiment is expected to pick up with further enhancement of
employment support under Aatma Nirbhar Bharat Rozgar Yojana (ANBRY), targeted support
to the urban poor through the credit guarantee scheme for on-lending by micro-finance
institutions, and wider Bharat-Net digitisation coverage. Free food-grain and enhanced
fertilizer subsidies under the package along with continued MGNREGA implementation, on
the other hand, would serve as a cushion for rural demand in the coming quarters. Maintaining
a rapid pace on vaccination and quickly bridging health care infrastructure gaps across both
urban and rural areas would emerge as the most sustainable stimulus for durable recovery of
the Indian economy.

2
COVID-19: As Second wave ebbs, gradual recovery in mobility and economic activity
1. The caseload of COVID-19 in India continues to recede in June with daily new cases
falling to less than 50 thousand. Active cases have declined to 4.5 lakh from a maximum load
of 37 lakh at the peak of the second wave. This is reflected in the doubling rate, which increased
to 272 days in June from its trough of 46 days in April. Recoveries outnumbered fresh cases
for the 49th day, with recovery rate touching 97 percent. Around 27 States and UTs witnessed
less than 1000 daily cases as on 30th June 2021. Maharashtra and Kerala, however, continue to
record more than 8000 daily cases constituting more than 40 percent of the case load. Active
cases exhibited a declining trend across all states.

Daily Cases (7 days moving average)

As on 31st May 2021 As on 30th June 2021

<1000 1000-8000 >=8000

Active Cases (7 days moving average)
As on 31st May 2021 As on 30th June 2021

<10,000 10,000-25,000 >=25,000

Source: https://www.covid19india.org/
Source: https://www.covid19india.org/

3
2. Continuing the emphasis on testing and tracing, the average daily testing continued to
remain high in June at 21.7 lakh. At pan India level, weekly positivity rate plummeted to 2.3
percent on 30th June from the peak of 22.8 percent on 9th May. By June end, 78 percent of
districts have achieved positivity rate below 5 percent, while 11.4 percent are still fighting to
curb the infection with positivity rate more than 10 percent. The declining trend in positivity
rate across majority of districts has inspired confidence and States have gradually relaxed
movement restrictions. This is mirrored in google mobility indicator as retail and recreation
activity ameliorate in June to -41.8 percent compared to -63.1 percent in preceding month.
Grocery activity returned to pre-pandemic level in June to 1.7 percent compared to -25.3
percent in May 2021.

Daily Positivity Rate (3 days moving average)

As on 31stMay 2021 As on 30th June 2021

<5% 5-15% >=15%

Daily Retail and Recreation Mobility (3 days moving average)

As on 31st May 2021 As on 30th June 2021

<-30% Between-30% and-60% >-60%

Source: https://www.covid19india.org/, Google Mobility

4
Vaccination pace doubles in June, various studies manifest efficacy of vaccines
3. Vaccination is an integral pillar of the comprehensive strategy of Government of India
for containment and management of the pandemic. The effectiveness of vaccination in
combating infection has been well established in the recent studies1 conducted across country.
A study conducted by Indian Council of Medical Research -National Institute of Epidemiology
(ICMR-NIE)2 in Tamil Nadu on 1.2 lakh police workforce found that incidence of COVID-19
deaths with nil, one or two dose was 1.17, 0.21 percent and 0.06 percent per 1000 police
personnel respectively. Thus, vaccination clearly reduces the intensity of the infection.

4. Under the National Vaccination programme, the COVID-19 Vaccine Intelligence

Network (Co-WIN) with the inbuilt e-VIN (Electronic Vaccine intelligence network) system
registers the beneficiaries, tracks the vaccines and facilitates real-time monitoring of storage
temperatures across 29,000 cold chain points at the National, State, and District level. In line
with its commitment to ‘One Earth, One Health’, India has offered the CoWIN platform as a
digital public good to other countries to customise and use it for their specific inoculation
drives.

5. The vaccination programme, based on scientific and epidemiological evidence, has

given priority to protecting the professionals, health and frontline workers as well as the most
vulnerable population groups. Around 87.4 per cent of registered Health Care Workers
(HCWs), 90.8 per cent of registered Front Line Workers (FLWs) and 49.4 per cent of the
population aged 60 years have been covered under the 1st dose. India has now crossed the 35
crore mark in its cumulative COVID vaccination coverage with 21 per cent of the population
covered under 1st dose and 4.6 per cent of the population fully vaccinated. International
evidence reveals that infections fell by 65 percent after a first dose, thus providing significant
protection against COVID-19 even with a single dose3. Additionally, a single dose generates
significant antibody response in infected people at par with two-doses for those who did not
get the infection4,5.

6. Average daily vaccination rate has doubled to 41.3 lakh doses in June compared to 19.3
lakh in May subsequent to implementation of the revised national COVID Vaccination Policy
since 21st June 2021. At the current inoculation pace, it is estimated that India will administer
over 67 crore doses before the festive season begins in September. A significant coverage by
the vaccine could provide a crucial boost for domestic demand. An analysis of the state wise
proportion of population vaccinated relative to its share in total population indicates that
Assam, Bihar, Uttar Pradesh, Tamil Nadu, West Bengal and Jharkhand need to ramp up their
vaccination drive. Vaccination remains the key guard against any prospective future waves and
the coverage of the population needs to be enhanced across all States.

1
https://science.thewire.in/the-sciences/covid-vaccines-offer-strong-protection-against-infection-apollo-fortis-
studies/
2
https://www.ijmr.org.in/preprintarticle.asp?id=318915;type=0
3
https://www.bmj.com/content/373/bmj.n1068
4
https://www.ijidonline.com/article/S1201-9712(21)00436-7/pdf
5
https://www.biorxiv.org/content/10.1101/2021.07.01.450676v1

5
 Pace of Vaccination
35 80
Daily doses (7 days MA, RHS) Total Doses (7 DMA)
30 70

25 60
50
20

Lakh
Crore

40
15
30
10 20
5 10
0 3/2/21 0

4/1/21

5/1/21
1/16/21

1/31/21

2/15/21

3/17/21

4/16/21

5/16/21

5/31/21

6/15/21

6/30/21
State wise share of vaccination relative to population share
12%
On right track, keep going
State share in total vaccination

10% MH
UP (17%,10%)

8% GJ RJ
KA MP
6% TG WB
KL AP
TN BR
4% CT OR
DL HR
2% JK PB JH
UT AS Should vaccinate more
0%
0% 2% 4% 6% 8% 10% 12%
State share in total population
Source: https://www.covid19india.org/, MOHF&W

Prospective Waves: Forewarned is forearmed

7. There have been various predictions/estimations6 of a third wave in India. However,
the emergence of a third wave could be significantly buffered by expanding vaccination and
meticulous observation of covid-appropriate behaviour along with social distancing measures.

8. The waning of the second wave in India mirrored the trend across the globe. June
marked further decline in daily new confirmed COVID-19 cases across the world, though there
has been a slight uptick in the last week of the month, with UK experiencing a fresh surge of
infections. A variant labelled ‘Delta” by the World Health Organization (WHO) is being
regarded as highly transmissible and has been categorised as a variant of concern (VOC). It is
now present in 96 countries and is the most common variant in US. The variant’s spread has
heightened the contrast between unvaccinated countries facing a surge in hospitalizations and
death rate and highly vaccinated countries where the link between rising case rates and serious
illness has been largely broken7. Thus, it is imperative to accelerate the progress of vaccination
across the globe.

6
https://www.ijmr.org.in/preprintarticle.asp?id=319408;type=0; https://www.sutra-india.in/
7
https://www.wsj.com/articles/delta-variants-spread-hobbles-global-efforts-to-lift-covid-19-restrictions-
11625131968

6
9. Vaccination has picked pace with more than 3.32 billion doses given worldwide and
around 24.7 per cent and 11.6 per cent of total world’s population partially and fully inoculated
respectively. However, only 1 per cent of individuals in low-income countries have been
covered with the first dose. This unequal access to the vaccine limits the gains of vaccination
to global growth, through health costs and opportunity cost of consumer confidence. Given the
disruptive impact of the pandemic on the global economy, policy makers need to control its
spread, balance the need to support the recovery while safeguarding price stability and fiscal
sustainability and to continue efforts toward promoting growth-enhancing reforms.

Global Overview – swift recovery clouded by inflationary pressures

10. Strong global economic growth continued into June 2021, with renewed effervescence
in Euro Area, and soaring activity in US, as falling infections and accelerating inoculations
brighten the recovery prospects. In view of the strong economic rebound, World Bank’s global
growth forecast for 2021, has been revised upward by 1.5 points to 5.6 per cent in June 2021 -
its strongest post-recession pace in 80 years. The strong economic recovery, however, remains
concentrated in few major economies, while most emerging market and developing economies
(EMDEs) remain subdued compared to pre-pandemic levels. Risks emanating from the
pandemic trajectory and burgeoning debt levels lend substantial uncertainty to the global
economic outlook. Moreover, inflationary pressures in input as well as output prices have built
up further, fanned by both supply disruptions and demand speeding. With an upward revision
in inflationary expectations, the US Federal Reserve announced a change in stance, with
sooner-than-expected tightening of monetary policy and probable interest rate increases in
2023, rendering stock markets jittery.

11. Global PMI for June stood at a thriving 56.6, as new orders and job creation continued
to rise at sturdy pace. Enthused by further easing of restrictions, the US Composite PMI
underwent substantial expansion, though with softened momentum compared to May levels as
delivery delays reined in growth in manufacturing. Eurozone PMI grew at sharpest pace in 15
years, as economies re-opened and vaccination gains boosted confidence, firming up
manufacturing activity and vitalized service sector expanding at 41-month high rate, while
prices rose on the back of demand outstripping supply. A swift resurgence in global demand
portends well for Indian exports, especially for MSMEs, in alignment with the recently
announced policy support in terms of credit insurance.

Global Trade
12. Global trade remained buoyant in June, with uptick in global commercial flight activity
after a modest moderation in May. The average daily number of international commercial
flights in June grew on both year-on-year basis (87 per cent) and sequentially (9 per cent rise
compared to May 2021). Rise in global port activity carried on in May, with continued uptrend
in Euro area ports and fresh upswing in Chinese ports. Simultaneously, persisting rise in freight
rates and container shortages restrain a full-throttle upsurge, compounded by disruptions in
supply chains, such as Suez blockage and COVID outbreak in port of Yantian.

7
 Global PMI Composite Indices Global Air and Port Traffic
Global (RHS) China Average Number of Commercial Flights
80 US Eurozone 120 Container Throughput Index (RHS) 140

70 120
100

Thousands
60 100
80 80
50
40 60 60

30 40
40
20 20

10 20 0

Nov/20
May/20

Jul/20

Sep/20

May/21
Mar/20

Mar/21
Jan/20

Jan/21
Nov-20
May-20

Jul-20

Sep-20

May-21
Jan-20

Mar-20

Jan-21

Mar-21

Source: IHS Markit Source: RWI/ISL-Containerumschlag, Flightradar24

Commodity and Inflation

13. Pumped up commodity prices continued well into May, with a broad-based rise
supported by increased optimism and strong global recovery. The IMF All Commodities index
grew by 70 per cent YoY in May, with a nearly 250 per cent YoY rise in natural gas prices
(due to a colder-than-usual Europe and warmer US), and considerable rises in crude oil, coal,
and base metal prices. The rise was mirrored in the sequential trend, as All Commodities Index
rose by 7.3 per cent over April 2021, powered by a 20.7 per cent rise in natural gas, and around
10 per cent increase in both base metals and coal. Gold prices gained further ground on back
of weakening dollar and lowering yields. Base metals prices rose consecutively for the
thirteenth month, with resurgent global manufacturing activity steadily and a softer dollar.
Consumer price inflation sped up in Advanced Economies, barring Japan, with US inflation
reaching 13-year high at 5 per cent, matched by steady ascent of prices in Emerging Market
Economies.

Global Inflation Trend (YoY) Commodity Prices

All Commodity Base Metals
6% US China Natural Gas Crude Oil (petroleum)
Euro Area Japan Food Gold (RHS)
5% 250 2000
US$ per troy ounce
Index

4% 200 1800

3% 150 1600
2%
100 1400
1%
50 1200
0%
0 1000
Nov/19

Nov/20
May/19
Jul/19
Sep/19

May/20
Jul/20
Sep/20

May/21
Mar/21
Jan/19
Mar/19

Jan/20
Mar/20

Jan/21

-1%
Jun/19

Jun/20
Apr/20
Apr/19

Aug/19

Feb/20

Aug/20

Feb/21
Apr/21
Oct/19
Dec/19

Oct/20
Dec/20

-2%
Source: OECD Source: IMF

Financial markets
14. Global stock markets witnessed intermittent stretches of turbulence, as investors
recalibrated their inflation and interest rate expectations in June. This paved the way for nearly
zero or negative rise in indices in advanced economies over the previous month. Asian stocks,

8
 as measured with MSCI Asia Pacific Index, also dipped around 21st June, and closed at a
slightly lower level than May 2021. In the currency markets, US dollar index strengthened by
2.7 per cent in June against defined basket of currencies, recording its biggest month-on-month
rise since November 2016, buttressed by the Federal Reserve’s interest rate outlook and above-
expectation private payrolls data. Advanced economies saw a slight appreciation of their
currencies in June, while MSCE Emerging Market Index closed 1 per cent lower compared to
May.

15. The world economy is, therefore, currently navigating towards a swift recovery but
elevated risks. It is likely to remain uneven and dependent on the effectiveness of vaccination
programmes and public health policies. The risk that sufficient post-pandemic growth is not
achieved or widely shared will be alleviated on the adoption of flexible and sustainable policy
frameworks, and on the quality of international cooperation.

Domestic Macro-economic overview: Turning the Corner after the Second Wave
Agricultural Sector
16. The Government has hiked the Minimum Support price (MSP) of kharif crops for
marketing season 2021-2022, with a view to ensuring remunerative prices to the farmers for
their produce. The increase in MSP for Kharif Crops for marketing season 2020-21 is in line
with the Union Budget 2018-19 announcement of fixing the MSPs at a level of at least 1.5
times of the all-India weighted average Cost of Production (CoP). Concerted efforts have been
made over the last few years to realign the MSPs in favour of oilseeds, pulses and coarse cereals
to encourage farmers to shift a larger area under these crops and adopt best technologies and
farm practices. Higher MSPs have been supported by enhanced levels of procurement by the
Government buttressing rural farm cash flows. Procurement of 433.08 LMT of wheat in 2021-
22 has been at a record high. About 49.16 Lakh farmers have already been benefitted from the
ongoing wheat procurement operations with MSP value of ₹85,483.25 Crore.

MSP for Kharif Marketing Season, 2021-22 Record Procurement of Wheat and Rice
2020-21 2021-22 Returns over cost (%) 60
9,000 90 Wheat Rice
80 50
7,000 70
60 40
Per cent
Rs/Qtl

50
5,000
40 30
30
3,000 20 20
10
1,000 0 10
Paddy
Jowar

Tur

Groundnut

Soyabean

Nigerseed
Cotton
Maize
Ragi
Bajra

Sunflower seed

Sesamum
Moong
Urad

0
2014-15

2015-16

2016-17

2017-18

2018-19

2019-20

2020-21

Source: Department of Agriculture and Farmers Welfare

17. The Southwest monsoon has so far covered most parts of the country except parts of
Rajasthan, Delhi, Haryana and Punjab. For the country as a whole, cumulative rainfall during
this year’s Southwest Monsoon season’s Rainfall till 30th June 2021 has been above normal

9
by about 10 per cent above Long Period Average (LPA). The total live storage in 130 important
reservoirs is nearly 99 percent of the last year's storage and 138 percent of the average of last
ten years. This augurs well for a bountiful kharif output. As on 25th June 2021, farmers have
sown 202.72 lakh hectares, 55.9 per cent lower than corresponding period of last year with a
1.5 per cent rise in area under rice. Fertilizer sales are picking up with 65.87 LMT in June 2021
as compared to 68.7 LMT in June 2020. Tractor domestic sales declined by 8 per cent in May
2021 as compared to the corresponding month last year.

18. Under “Pradhan Mantri Garib Kalyan Anna Yojana” (PM-GKAY) (May – June 2021),
a total allocation of over 79 LMT of foodgrains at an estimated expenditure of about Rs. 26,602
Crore was estimated. Out of the total allocation, over 98 per cent foodgrain has been lifted by
States/UTs and 81 percent has been distributed. This Scheme has been extended for a further
period of five months till November 2021 which would entail provision of around 204 LMT of
foodgrains, free of cost, for a period of further 5 months to around 80 Crore NFSA beneficiaries
with an estimated financial implication of up to ₹67, 266 Crore. This additional free of cost
allocation of food grains will be over and above the regular monthly food grains allocated for
beneficiaries covered under the NFSA. The entire cost of this additional allocation under PM-
GKAY, including the expenditure on intra state transportation, dealers’ margin etc., will be
borne by Government of India without any sharing by States/UTs. MGNREGS continues to be
a critical support in providing rural employment, though with the start of the kharif season the
demand of work by 5.06 persons in June 2021 was lower by 20 per cent than last year.

Industry
19. Overall IIP recorded a growth of 134.4 percent in April 2021 as compared to a
contraction of 57.3 percent in April 2020 largely due to a strong and a favourable base effect.
Overall Index is, however, at 94.1 percent at its pre lockdown level. While the electricity sector
has recovered to the pre lockdown level, mining and manufacturing are yet to recover fully to
the pre lockdown level. All sub-components based on the use-based classification have also
registered a YoY growth in April 2021 mainly due to the base effect. However, industrial
output during April 2021 recorded a contraction of 13 per cent over March 2021 – largely due
to the impact of the second wave induced movement restrictions. The highest contraction of
22.1 per cent has been witnessed in the mining sector followed by 12.6 per cent in the
manufacturing sector. In the use-based category the output of capital goods witnessed a sharp
sequential de-growth of 20 per cent.

20. In May 2021, core sector output rose by 16.8 per cent as against a contraction of 21.4
per cent in May 2020. The monthly index is still 6.1 per cent lower than the pre-pandemic index
of February 2020 and 8.2 per cent lower than May 2019.On a month on month level, there was
a marginal decline of 3.7 per cent which reflects the impact of the second wave of the COVID-
19 pandemic and the associated lockdowns on business activities. Month-on-month
improvement has been registered in case of fertilisers (ahead of kharif season), natural gas and
coal production. The strong push for capex from the Government bodes well for steel and
cement production while the advent of the kharif season would drive fertilizer production in
subsequent months.

10
 IIP Growth
IIP Mining Index of Core Industries YoY Growth (RHS)
Manufacturing Electricity 80%
180 140
160 60%
120
140 40%
100
120
20%

Index
80
Index

100
80 60 0%
60 -20%
40
40
20 -40%
20
0 0 -60%

Aug/20
Jun/19
Aug/19

Jun/20
Oct/19

Oct/20
Apr/19

Feb/20
Apr/20

Feb/21
Apr/21
Dec/19

Dec/20
Oct/19

Oct/20
Jul/19

Jul/20
Apr/19

Apr/20

Apr/21
Jan/19

Jan/20

Jan/21

Source: MoSPI, Office of Economic Advisor, DPIIT

21. India's PMI-Manufacturing fell back into contractionary zone during June 2021 after
ten months, as the intensification of the pandemic and related containment measures negatively
impacted factory orders, production and exports. India’s power consumption, one of the major
indicators of the economic recovery since September 2020, rose in June after a modest
sequential decline in May, registering a growth rate of 8.4 per cent over June 2020 but lower
by 3.0 per cent over June 2019. Ebbing of the second wave and ensuing unlocking of mobility
restrictions are expected to have paved the way for resumption in commercial activity and
consequent rise in power consumption.

Power Consumption
140000 COPPY Current YoY growth (RHS) 50
120000 40
Mega Units (MUs)

100000 30
20
Per cent

80000
10
60000
0
40000 -10
20000 -20
0 -30
Jun/20

Aug/20

Oct/20

Nov/20

Jun/21
Feb/20

May/20

Jul/20

Sep/20

Feb/21

May/21
Apr/20

Dec/20

Apr/21
Jan/20

Mar/20

Jan/21

Mar/21

Source: POSOCO; COPPY: Corresponding Period of Previous Year

22. GST completed 4 years on 1st July 2021, having replaced a complex indirect tax
structure with a simple, transparent and technology-driven tax regime; integrating India into a
single common market, while continuously evolving to ease the compliance burden of common
man. Better tax compliance has been attained by GST through mitigation of tax cascading,
double (multiple) taxation, lower tax burden, and improving the competitiveness of domestic
industries in international market by removing hidden and embedded taxes. Mirroring the
softening of recovery momentum due to second wave induced restrictions, Gross GST revenue
collection for June 2021, reflecting transactions done in May 2021, declined to ₹92,849 crore.

11
23. E-way bills data, bellwether of economic and commercial activity, signaled a gradual
“upturn with unlock” in June, as localized movement restrictions affecting inter and intra state
goods movement were eased. The momentum lost in May was regained to a large extent in
June, with 37.1 per cent MoM expansion in the number of E-way bills generated in June
compared to May 2021. Total e-way bills generated stood at 5.47 crore in June 2021, 26 per
cent YoY growth over June 2020, and 10 per cent growth compared to June 2019. In terms of
value, e-way bills generated reached ₹17.16 lakh crore in June 2021, seeing a 38 per cent rise
over previous month, and a 20 per cent gain over June 2019. This augurs well for GST
collections in subsequent months.

GST Revenue Collection Daily Average ETC Collection and Count

COPPY Current Average Daily ETC Collection
1.4 120 Average Daily ETC Count (RHS) 70

1.2 100 60
Lakh crore

1.0 50
Rs Crore 80
0.8 40

Lakhs
60
0.6 30
40
0.4 20

0.2 20 10

0.0 0 0
Feb-20

Sep-20

Feb-21
Mar-20

May-20

Mar-21

May-21

Jun/20

Jun/21
Jun-20

Oct-20

Dec-20

Jun-21

Apr/20

Jul/20
Aug/20

Nov/20

Apr/21
Jan/20
Feb/20

Sep/20

Jan/21
Feb/21
Apr-20

Jul-20
Aug-20

Nov-20

Apr-21

Mar/20

May/20

Oct/20

Mar/21

May/21
Jan-20

Jan-21

Dec/20
Source: GSTN; COPPY: Corresponding Period of Previous Year

24. In highway traffic movement, catching-up of sequential momentum in June 2021 was
evident in average daily electronic toll collection (ETC) both in terms of value and volume,
owing to relaxation of localised lockdowns and resumption of commercial activity. The
localized lockdowns and mobility restrictions, though, had an expectedly adverse impact on
automobile sales, a key indicator of economy’s performance. May data underscores a sharp fall
of 65 per cent MoM in two and three-wheelers sales (25 per cent growth over May 2020) along
with a 66 per cent MoM decline in passenger vehicles (with 162 per cent growth over May
2020). However, more recent numbers from vehicle registrations depict a resumption of vehicle
sales in June, with unlocking of economy.

25. Freight and Traffic Activity indicators exhibited varied trends in May 2021, after
moderating sequentially in April 2021. In May, Port traffic in major ports registered a
contraction of 1.8 per cent MoM over April 2021 and a 33.2 per cent YoY growth, continuing
a loss of sequential momentum since last month. Railways maintained its momentum in terms
of freight loading and earnings with rail freight loading at 112.65 million tonnes - 11.19 per
cent higher compared to June 2019 and 20.37 per cent higher compared to June 2020. Air cargo
growth and air passenger traffic witnessed sequential contraction in May.

12
 All India Vehicle Registrations Freight and Traffic Activity
25 Revenue Earning Rail Freight Traffic ('000 Tonnes)
Port Traffic ('000 Tonnes)
Total Air Passenger Traffic ('000 Numbers)
20 Air Cargo Traffic ('000 Tonnes) RHS
140000 350

120000 300
Lakhs

15

'000 Tonnes/Numbers
100000 250

'000 Tonnes
80000 200
10
60000 150

40000 100
5
20000 50

0 0
0

Mar-19

Sep-19

Mar-20

Sep-20

Mar-21
May-19

May-20

May-21
Jan-19

Jul-19

Nov-19
Jan-20

Jul-20

Nov-20
Jan-21
Jan/20
Jan/19

Jul/19

Nov/19

Jul/20

Nov/20
Jan/21
Mar/19

Sep/19

Mar/20

Sep/20

Mar/21
May/19

May/20

May/21

Source: VAHAN Dashboard Source: Ministry of Railways, Indian Ports

Association, Airports Authority of India

Services
26. PMI Services fell further to 41.2 in June from 46.4 in May as the emergence of the
pandemic and the reintroduction of containment measures restricted demand. However, with
the ebbing of the pandemic, ease of restrictions and widening coverage of vaccination, the
services sector activity is expected to recover. UPI transactions, in terms of value, stood at an
all-time-high of ₹5.47 lakh crore in June 2021, growing by 11.6 per cent sequentially over May
2021, at level more than twice compared to June 2020. UPI transaction volume firmed up to
280 crore in June 2021 from 254 crore in May 2021, while more than double the volume in
June 2020, with a sequential growth of 10.4 per cent over May 2021. The uptick in UPI
transactions in June corroborates a resumption of activity, and rising acceptance of digital
modes of payment.

UPI Transactions Petroleum Products Consumption

6 Value Volume (RHS) 300
20000 Current COPPY
5 250
Rs. Lakh Crore

'000 metric tonnes

4 200 15000
Crore

3 150
10000
2 100
5000
1 50

0 0 0
Jun/19
Aug/19

Jun/20
Aug/20

Jun/21
Oct/19

Oct/20
Apr/19

Feb/20
Apr/20

Feb/21
Apr/21
Dec/19

Dec/20

Sep 20
Jul 20
May 20

May 21
Mar 20

Mar 21
Jan 20

Nov 20

Jan 21

Source: National Payments Corporation of India; PPAC, M/o Petroleum & Natural Gas;
COPPY: Corresponding Period of previous Year

27. Indian basket of crude oil prices stood at 71.63 USD/bbl in May 2021 compared to an
average of 66.7 USD/bbl in May 2021 and 63.3 USD/bbl in April 2021 - driven by optimism
and demand build-up amid strengthening global recovery. Domestic prices of petrol and diesel

13
rose further in June 2021 on the back of rising international crude oil prices. Domestic
consumption of petroleum products declined by 11.3 per cent in May 2021 compared to April
2021.

Upside pressures on Inflation

28. In May 2021, headline inflation (CPI-C) touched a high at 6.3 per cent, as compared to
4.2 per cent in April 2021 and 6.27 per cent in May 2020. A positive price momentum cutting
across food, fuel and core categories, along with an unfavourable base effect contributed to this
rise in headline inflation. Inflation in rural areas at 6.48 per cent was higher than in urban areas
at 6.04 per cent in May 2021. Food inflation based on Consumer Food Price Index (CFPI)
increased to 5.01 per cent in May 2021 as compared to 1.96 per cent in April 2021, mainly on
account of increase in inflation of ‘cereals & products’, egg, ‘milk & products’, ‘oil & fats’,
fruits, vegetables, ‘pulses & products’, sugar and spices. Inflation in Fuel and light’ group in
May 2021 reached 11.58 per cent from 7.98 per cent in April 2021 – largely due to rising global
crude oil prices and a low base effect. CPI-core (excluding food and fuel) inflation surged to
6.6 per cent in May, the highest since May 2014. All core sub-groups registered a pick-up in
inflation, with substantial increases in clothing and footwear, household goods and services,
transport and communication, recreation and amusement, and personal care and effects.

29. WPI inflation registered a series-high of 12.94 per cent in May 2021 as compared to
10.49 per cent in April 2021 and (-)3.3 per cent in May 2020. This was largely on account of
increase in inflation of Fuel & power and Manufactured products and a low base effect. WPI
food inflation (primary food + manufactured food) increased to 8.11 per cent in May 2021 as
compared to 7.58 per cent in the previous month, on account of increase in inflation of pulses
(12.09 per cent), milk (2.51 per cent), edible oils (51.71 per cent) and sugar (2.34 per cent).
WPI-Core inflation also surged to a high of 9.97 per cent in May 2021 as compared to 8.31 per
cent in April 2021 and (-) 1.3 per cent in May 2020.

CPI-C WPI
CPI-C CPI-Food 40% WPI WPI-Food
CPI-Core CPI-Fuel WPI-Fuel WPI-Core
30%
14%
20%

10% 10%

0%
6%
-10%

2% -20%

-30%
Nov/19

Nov/20
May/20

Jul/20

Sep/20

May/21
Jan/20

Mar/20

Jan/21

Mar/21
Nov-20
Nov-19

May-20

Jul-20

Sep-20

May-21
Jan-20

Mar-20

Jan-21

Mar-21

-2%

Source: MoSPI, DPIIT

30. The localised restrictions due to the second wave could have led to some supply-side
disruptions contributing to price pressures in May 2021. With the encouraging progress of the
south-west monsoon, supply side interventions in the pulses and edible oils market, and gradual

14
unlocking of states with declining caseload would mitigate cost pressures going forward
However, rising international commodity prices, especially of crude and logistics costs, pose
upside risks to the inflation outlook. Global crude oil prices recently breached their two year
high mark of $75/barrel. As per the latest survey conducted in May by RBI, 1-year ahead
inflation expectations of households have risen to 10.9 per cent, from 10.2 per cent in March
21 - partly reflecting the uncertainty brought about by the severe second wave of Covid-19.
Accounting for these factors, RBI has projected CPI inflation at 5.1 per cent during 2021-22:
5.2 per cent in Q1; 5.4 per cent in Q2; 4.7 per cent in Q3; and 5.3 per cent in Q4 of 2021-22,
with risks broadly balanced.

Trends in Food Inflation in Recent Years

Headline inflation based on CPI-Combined (CPI-C) which was in a comfortable range till
2018 has shown a rising trend from 2019, before moderating lately. The average CPI-C
inflation which was 5.9 per cent in 2014-15, fell continuously to 3.4 per cent in 2018-19
before increasing to 4.8 per cent in 2019-20 and further to 6.2 per cent in 2020-21.

Within various groups of CPI-C, the increase in inflation in the last two years was mainly
driven by rise in food inflation, which increased from 0.1 per cent in 2018-19 to 6.7 per cent
in 2019-20 and further to 7.7 per cent in 2020-21. Since the weightage of food in CPI is very
high, the impact of food prices on overall CPI inflation is high. The contribution of ‘food &
beverages’ to overall CPI inflation after showing a decline in 2017-18 and 2018-19 started
to rise since then and is contributing much higher than its weight. Different
commodities/groups have contributed to food inflation in different years. While cereals were
the major contributor to food inflation from 2016-17 to 2018-19, vegetables and protein rich
food items contributed highly in 2019-20. In 2020-21, ‘meat & fish’ was the major
contributor followed by ‘oils & fats’.

Contribution of major groups to Contribution of food groups to CPI Food

overall CPI inflation (CFPI) inflation
Miscellaneous Fuel and light Cereals & products Meat & fish Milk & products
Housing Clothing & footwear Oils & fats Vegetables Pulses & products
Pan, tobacco & intoxicants Food & beverages Others
100%
100%
75%
75%
50%
50%
25%

25% 0%

0% -25%
Weights

2016-17

2017-18

2018-19

2019-20

2020-21

-50%
2016-17 2017-18 2018-19 2019-20 2020-21
Source: MoSPI
Note: Others include egg, fruits, sugar and spices

Food inflation has started declining and recorded 2.0 per cent in April 2021 and slightly
increased to 5.0 per cent in May 2021. Moderation in inflation is observed in most of the

15
sub-groups of food, except ‘meat & fish’, ‘oils & fats’, ‘pulses and products’ and fruits.
While inflation in ‘cereals & products’ and ‘milk & products’ has declined consistently from
July 2020 and May 2020 respectively, inflation in ‘oils & fats’ has been rising since
September 2019. Vegetables and fruits inflation has shown a mixed trend with several ups
and downs in the last five years indicating seasonal impacts.

Food inflation in rural and urban areas has almost followed the same trend in the last five
years. However, a wide gap was observed in 2019-20, with urban areas registering much
higher food inflation when compared to rural areas. CFPI and WPI Food index has mostly
moved in line since April 2016. Since beginning of 2019, food inflation has witnessed an
uptick and CFPI reached a high of 14.2 per cent and WPI Food index peaked at 11.2 per cent
in December 2019. During 2020-21, divergence in CPI and WPI food inflation increased
mainly on account of supply side disruptions due to COVID 19 pandemic.

Rural- Urban food inflation CFPI and WPI Food index

20 16
Rural Urban CFPI WPI- FOOD INDEX
15 12
Per Cent

10 8
Per cent

5 4

0 0

-5 -4
Oct/18

Aug/19

Jun/20
Nov/20

Feb/17

Oct/18

Aug/19

Jun/20
Nov/20
Sep/16
Feb/17
Jul/17

May/18

Sep/16

Jul/17

May/18
Apr/16

Apr/21

Apr/16

Apr/21
Dec/17

Dec/17
Mar/19

Jan/20

Mar/19

Jan/20

Source: MoSPI

Measures to control food inflation

Government has taken various measures from time to time to stabilize prices of food items
which, inter-alia, include appropriately utilizing trade and fiscal policy instruments like
import duty, minimum export price, export restrictions, etc. to regulate domestic availability
and moderate prices; imposition of stock limits and advising States for effective action
against hoarders and black marketers; and, provision of higher minimum support prices to
incentivize farmers for increasing production. Government is also implementing Schemes
which, inter-alia, include Mission for Integrated Development of Horticulture (MIDH),
National Food Security Mission (NFSM), National Mission on Oilseeds and Oil Palm
(NMOOP) etc. for increasing agricultural production and productivity through appropriate
interventions.

Government also implements Price Stabilization Fund (PSF) to help moderate the volatility
in prices of agri-horticultural commodities through buffer of pulses namely Urad, Gram, Tur,
Moong, and Masoor as well as buffer of onion. The main objective of the buffer is to release
the stock in a calibrated manner to moderate price volatility and thereby mitigate hardships
to the consumer. Government has taken several steps to improve the availability of pulses,
onion and potato and make them available to consumers at affordable prices. The scope of
‘Operation Green Scheme’ has also been enlarged to include 22 perishable products.

16
RBI’s proactive liquidity management continues, systemic liquidity remains in surplus
31. Liquidity in the system continues to remain in surplus in June 2021 with average daily
net absorption under LAF widened to reach ₹5.69 lakh crore compared to ₹5.52 lakh crore in
May 2021. Borrowings by banks under MSF reduced by nearly 87 per cent on a daily average
basis to Rs. 65.3 crore during the same period. Liquidity measures announced by RBI in FY
2021-22 including those introduced in its first bi-monthly monetary policy of the year
amounted to ₹3.61 lakh crore, equivalent to 1.8 per cent of nominal GDP for FY 2021-22.
These measures included G-SAP and regular OMOs through NDS-OM (₹2.2 lakh crore),
liquidity facility for AIFIs (₹0.66 lakh crore), Special Long-Term Repo Operations (SLTRO)
for Small Finance Banks (SFBs) (₹0.10 lakh crore), term liquidity facility to ease access to
emergency health services (₹0.5 lakh crore) and on-tap liquidity window for contact-intensive
sectors (₹0.15 lakh crore).

Surplus liquidity
Fixed rate reverse repo outstanding
8
Net liquidity injected

6
Rs. lakh crore

0
16/May/21

25/May/21
10/Apr/21

19/Apr/21

28/Apr/21

3/Jun/21
1/Apr/21

7/May/21

12/Jun/21

21/Jun/21

30/Jun/21
Source: RBI

32. CiC in June 2021 stood at ₹29.80 lakh crore registering a YoY growth of 12.32 per cent
compared to 14.73 per cent in June 2020 and 12.70 per cent compared to pre-Covid June 2019
and a sequential expansion of 0.82 per cent compared to May 2021. RBI’s liquidity injections
and foreign exchange operations have more than compensated for the liquidity drain owing to
increase in CiC.

33. Also reflecting surplus liquidity is the money market rates trailing below repo rate
levels. While weighted average call rate (WACR) and the tri-party repo rate traded 87 bps and
79 bps lower than the repo rate levels in May 2021, these rates trailed even lower by 91 bps
and 89 bps respectively in June 2021. The term money market rates, i.e., the 3-month T-bill
rate and 3-month certificates of deposit (CD) rates traded around same levels in June 2021
compared to end of May 2021. During the fortnight ending June 4, 2021, fresh issuances of
CDs stood at ₹7547 crore compared to ₹5837 crore in the fortnight ending May 21, 2021. Fresh
issuances of CPs stood at Rs. 0.73 lakh crore in the fortnight ending June 15, 2021 compared
to ₹0.62 lakh crore in the previous fortnight.
Bank credit remains muted, money supply growth driven by aggregate deposits growth
34. Bank credit in the fortnight ending 18th June 2021 stood at ₹108.42 lakh crore, growing
by 5.8 per cent compared to 5.7 in the previous fortnight and 6.2 per cent in the corresponding
period of previous year, reflecting impact by subsequent waves of the pandemic and associated

17
 lockdowns and restrictions. Non-food credit growth stood at 5.89 per cent compared to 5.74
per cent in the previous fortnight and 6.19 per cent in the corresponding period of previous
year. The credit deposit ratio stood at 70.87 per cent in the fortnight ending June 18, 2021
compared to 70.81 per cent a fortnight ago and 73.90 per cent in the corresponding period of
previous year. Incremental credit-deposit ratio, the portion of deposits used to extend loans
stood at (-)58.18 compared to (-)53.14 per cent a fortnight ago and (-)41.08 per cent in the
corresponding period of previous year. Comparing investments in government securities and
other approved securities with respect to total deposits, the incremental investment deposit ratio
stood at 64.51 compared to 83.04 per cent a fortnight ago and 131.84 per cent in the
corresponding period of previous year.

Incremental credit deposit ratio and Quarterly Trend in Household Net Financial
investment deposit ratio Savings
9 Net HH Financial Savings 25
Incremental Credit-Deposit Ratio As a % of GDP (RHS)
8
Incremental Investment-Deposit Ratio (RHS)
7 20
140
0 6
In Rs Lakh

120 15

Percent
-100 5
100
-200 4
10
-300 80 3

-400 60 2 5
-500 40 1
02/Jul/20
29/Jul/20

21/Sep/20

03/Feb/21

22/May/21
11/Dec/20

25/Apr/21
07/Jan/21

29/Mar/21
02/Mar/21
05/Jun/20

25/Aug/20

14/Nov/20

18/Jun/21
18/Oct/20

0 0
Q1 Q2 Q3 Q4 Q1 Q4 Q1 Q2 Q3
2018-19 2019-20 2020-21

Source: RBI

35. Broad money grew by 10.7 per cent in the fortnight ending June 18 2021 compared to
12.3 per cent in the corresponding period of previous year. Growth in currency with public,
demand deposits and time deposits stood at 12.5 per cent, 20.1 per cent and 9.1 per cent
respectively in the fortnight as compared to respective component growths of 21.3 per cent,
12.1 per cent and 10.7 per cent in the corresponding period of previous year. Upward trajectory
in deposits growth bodes well for revival in savings from the decline seen in the third quarter
of FY 2020-21. Preliminary estimate of household financial savings is placed at 8.2 per cent of
GDP in Q3:2020-21, exhibiting a sequential moderation for the second consecutive quarter
after having spiked in the pandemic-hit first quarter of 2020-21. The moderation was driven by
a significant weakening in the flow of household financial assets, which more than offset the
moderation in the flow of household financial liabilities.
Benchmark bond yields traded around 6 per cent territory in June, mild hardening on the
shorter end of the curve
36. As per Government of India’s scheduled market borrowing calendar of ₹7.24 lakh crore
for first half (H1) of FY 2021-22, 42.3 per cent of it i.e., ₹3.06 lakh crore has been borrowed
on gross basis as on 25th June 2021 - compared to ₹3.14 lakh crore in the corresponding period
last year. Net Borrowings of ₹2.01 lakh crore has been completed as on 25th June 2021 as
compared to ₹1.83 lakh crore in the corresponding period last year. In the primary market, four

18
 G-Sec auctions were conducted in June 2021. As on 25 June 2021, State governments raised
Rs. 1.24 lakh crore as gross market borrowings, which is 20.2 per cent lower than the
corresponding period in FY 2020-21. Net market borrowings raised by States stood at Rs. 0.9
lakh crore, 28.8 per cent lower than the corresponding period in FY 2020-21.

37. Introduction of the secondary market G-sec acquisition programme (G-SAP) in FY

2021-22 with an upfront commitment to a specific amount for open market purchases of G-
secs exemplifies RBI’s continued efforts at ensuring a stable and orderly evolution of the yield
curve under supportive financial conditions. RBI conducted the third tranche of open market
purchase of G-secs of ₹34575 crore and SDLs of ₹5425 crore under G-SAP 1.0 on June 172021.
India’s benchmark 10-year G-Sec yield traded around 6 per cent mark in June. With the recent
high inflation prints of May 2021 impacting 10 year yields, benchmark yield reached 6.05 per
cent at end-June 2021 as compared to 5.99 percent at end-May 2021. G-Sec yields in June
experienced greater hardening of 15 bps on the short end (1 year and 5 year tenors) as compared
to the long end.

G-Sec yields AAA Corporate Bond yields

1 yr 3 yrs 1 yr 3 yrs 5yrs 10 yrs
5 yrs 10 yrs 8
7
10 yrs benchmark
7
6
Per cent

6
Percent

5
5

4 4

3 3
Jun/20

Aug/20

Nov/20

Jun/21
May/20

Oct/20

May/21
Feb/20

Apr/20

Jul/20

Sep/20

Feb/21

Apr/21
Dec/20
Jan/20

Mar/20

Jan/21

Mar/21
Jun/20

Aug/20

Nov/20

Jun/21
Oct/20
Feb/20

May/20

Jul/20

Sep/20

Feb/21

May/21
Apr/20

Dec/20

Apr/21
Jan/20

Mar/20

Jan/21

Mar/21

Source: CCIL, RBI, Extracted from CMIE

38. Tracking the movement in 10 year G-sec yield, while 10 year AAA rated corporate
bond yields rose by 7 bps in June over May to reach 6.8 per cent, 1-year and 5-year AAA yields
hardened by 15 bps and 9 bps respectively. Owing to the second wave, primary corporate bond
market issuances dipped to ₹0.21 lakh crore in May 2021 as compared to ₹0.32 lakh crore in
April 2021.

39. Net assets under management (AUM) of mutual funds increased to an all-time high of
₹33.1 lakh crore by end May 2021 from ₹32.4 lakh crore in April 2021, a rise of 2.1 per cent.
While mutual funds saw a net inflow of 0.92 lakh crore in April, outflows worth ₹0.39 crore
occurred in May owing to second wave driven lower fund mobilisation and higher redemptions.
However, ₹5910 crore worth of new mutual fund schemes were announced in May, 10.9 times
higher than April. The month also saw SEBI hiking mutual funds’ overseas investment limit to
USD 1 billion from the current level of USD 600 million, with the overall industry limit
continuing to be capped at USD 7 billion.

19
40. BSE Sensex and Nifty 50 remained rangebound in June 2021 and rose by 1.05 per cent
and 0.9 per cent over May to close at 52482.71 and 15721.40 respectively on 30th June 2021.
The volatility index also dipped to reach 13.04 by June-end as compared to an elevated 16.8
by May-end. With the second wave making markets more cautious, the banking sector was a
relative underperformer in equity markets in June 2021 with Bank Nifty dipping by 2.12 per
cent over May. Gold prices dipped sharply in the month from USD 1902.62 per ounce at May-
end to USD 1761.09 at June-end.

Equity market indices and Volatility

180 90
VIX (RHS) NIFTY 50* SENSEX**
160 80
140 70
120 60
Index

100 50
80 40
60 30
40 20
20 10
0 0
1/29/20
2/26/20
3/25/20
4/22/20
5/20/20
6/17/20
7/15/20
8/12/20

10/7/20
11/4/20
12/2/20
12/30/20
1/27/21
2/24/21
3/24/21
4/21/21
5/19/21
6/16/21
1/1/20

9/9/20

Source: BSE, NSE

* NIFTY 50 scaled down by 100, **SENSEX scaled down by 400

External Sector
41. India’s exports during the April to June quarter in 2021 jumped to a record US$95
billion – an increase of 85 per cent over corresponding period last year and 18 per cent over
FY 2019-20. This was largely on account of healthy growth in engineering, rice, oil meals and
marine products as well as other sectors. During June 2021, India’s merchandise exports were
at US$ 32.5 billion, registering a growth of 47.3 per cent over June 2020 and 29.7 per cent over
June 2019. On the other hand, India’s merchandise imports were US$ 41.9 billion in June 2021,
recording an increase of 96.3 per cent over June 2020 and 2.0 per cent over June 2019. India
was a net importer in June 2021, with a merchandise trade deficit of US$ 9.4 billion, as against
a trade surplus of US$ 0.7 billion in June 2020 and a deficit of US$ 16.0 billion in June 2019.

42. In June 2021, the value of non-petroleum exports was US$ 28.5 billion, registering a
growth of 41.8 per cent June 2020 and 27.3 per cent over June 2019. The value of non-
petroleum and non-gems and jewellery exports in June 2021 was US$ 25.7 billion, growing at
38.5 per cent over June 2020 and 33.6 per cent over June 2019. Oil imports were worth US$
10.7 billion, registering a growth of 114.9 per cent compared to US$ 5.0 billion in June 2020
and a contraction of 4.7 per cent compared to US$ 11.2 billion in June 2019. Non-oil, non-GJ
(Gold, Silver & Precious Metals) imports were US$ 27.6 billion in June 2021, recording a
growth of 84.5 per cent over June 2020 and 12.5 per cent over June 2019.

43. The current account balance for FY 2020-21 recorded a surplus of 0.9 per cent of GDP
as against a deficit of 0.9 per cent in 2019-20 – after a period of 17 years. This was largely due
to a sharp contraction in the trade deficit to US$ 102.2 billion from US$ 157.5 billion in 2019-

20
 20. In Q4: FY 2020-21, India’s current account balance recorded a deficit of US$ 8.1 billion
(1.0 per cent of GDP), as against a surplus of US$ 0.6 billion (0.1 per cent of GDP) in Q4 of
2019-20 and a deficit of US$ 2.2 billion (0.3 per cent of GDP) in the preceding quarter, i.e.,
Q3:2020-21.

Merchandise Trade Current Account Balance

Trade Balance Exports (RHS) Net Income
Net Transfers
Imports (RHS) Net Services
2 0.7 Net Merchandise Trade Balance
200 60 CAB to GDP ratio (RHS) 4
0

Growth rate (Y-o-Y), Per cent

-2 3
150 40
-4 2
USD billion

100

Per cent of GDP

-6

US$ Billion
20
1
-8
50
-10 0 0

-12 0 -1
-20
-14
-50 -2
-16 -40
-16.0 -3
-18 -100
Feb, 20

Feb, 21
Apr, 19

Dec, 19

Apr, 20

Dec, 20

Apr, 21
Jun, 19
Aug, 19

Jun, 20
Aug, 20
Oct, 19

Oct, 20

Jun,21

-60 -4
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
2018-19 2019-20 2020-21

Source: D/o Commerce, RBI

44. Net FDI inflows at US$ 44.0 billion in 2020-21 were higher than US$ 43.0 billion in
2019-20. Net FPI registered sharp increase of US$ 36.1 billion in 2020-21 as compared to US$
1.4 billion a year ago. On the other hand, External commercial borrowings to India recorded
lower inflow of US$ 0.2 billion, as compared with US$ 21.7 billion in 2019-20. In 2020-21,
there was higher accretion of US$ 87.3 billion to foreign exchange reserves as against an
accretion of US$ 59.5 billion a year ago.

45. At end-March 2021, India’s external debt was placed at US$ 570.0 billion, recording
an increase of US$ 11.5 billion over its level at end-March 2020. The external debt to GDP
ratio increased to 21.1 per cent at end-March 2021 from 20.6 per cent at end-March 2020.
Owing to higher forex reserves, the ratio of foreign exchange reserve to total debt was 101.2
percent at the end of March 2021, much higher than 85.6 percent at the end-March 2020. The
ratio has crossed 100 percent after 11 years, since 2010.

Indian Rupee broadly stable in June 2021 amid continuing net foreign inflows, net spot dollar
purchases and rising crude and dollar index
46. After rupee made a strong comeback in May 2021 on signs of easing of the second
wave, weakening dollar, IPO related inflows and highest carry trade returns on rupee in Asia,
it remained broadly stable in June. The month continued to witness healthy net FPI inflow of
USD 0.77 billion as compared to USD 0.91 billion net inflow in May 2021, offering upward
bias to the rupee. India also attracted total FDI inflow of USD 6.24 billion during April 2021,
higher than USD 4.59 billion in March 2021 and USD 4.53 billion during April 2021. FDI
Equity inflows amounted to USD 4.44 billion in April.

21
47. Rupee depreciation pressures in June, however, emerged from Delta coronavirus strain
denting risk appetite and Brent crude prices firming up from 68.48 USD/Barrel in May to 72.01
USD/Barrel. RBI also made a much higher net spot purchase of USD 7.1 billion dollars in June
2021 as compared to USD 1.2 billion dollars in May 2021. Consequently, rupee depreciated
only by a marginal 0.12 per cent in June as compared to May 2021 levels and reached USD/INR
73.36. India’s foreign exchange reserves increased to enter USD 600 billion plus territory at
USD 608.9 billion as on 25th June 2021, acting as a critical cushion against possible US
stimulus exit driven hot money outflows from Indian markets.

Exchange rate (INR/USD), FPI flows and RBI’s Net Purchase of USD
20 78
Net FPI RBI's Net Purchase of USD INR/USD (RHS)
15 76
10
74

INR/USD
USD Billion

5
72
0
70
(5)
68
(10)
(15) 66

(20) 64
Jun/19

Aug/19

Oct/19
Nov/19

Jun/20

Aug/20

Oct/20
Nov/20

Jun/21
Jul/20
May/19

Jul/19

Sep/19

Feb/20

May/20

Sep/20

Feb/21

May/21
Apr/19

Apr/20

Apr/21
Dec/19

Dec/20
Jan/20

Mar/20

Jan/21

Mar/21
Source: RBI and Investing.com

48. With excess global liquidity flowing into Indian markets in FY 2020-21, RBI’s
outstanding long dollar position (net forward purchase) stood at USD 72.75 billion by end
March 2021 as compared to short dollar position (net forward sale) of USD 4.9 billion by end
March 2021. RBI’s long dollar position, subsequently, fell to USD 64.94 billion by end-April
2021. The forward premia after staying elevated in the 5.5 per cent plus territory across tenors
in April and May 2021 dipped sharply in June 2021. With G-Sec yields remaining broadly
steady in the month, the 1-month rate, 3-month and 6-month forward premium on dollar fell
by 160 bps, 144 bps and 117 bps respectively as compared to May.

Fiscal Developments
49. Despite the harsh second wave of Covid and regional mobility restrictions of varied
degrees, the state of finances for the Central Government during April-May 2021 was much
better than that during the period of first wave in April-May 2020. During April-May 2021,
the Centre’s fiscal deficit stood at ₹1.23 lakh crore, which is 8.2 per cent of BE and is much
lower than the 5 year-moving average of 55.4 per cent of BE. Both the tax and non-tax revenue
collection during the first two months of FY 2021-22 were significantly higher than April-May
2020, due to resumption of economic activities and a lower base effect. The Net Tax Revenue
to the Centre stood at ₹2.34 lakh crore in April-May 2021, relative to Rs 33,850 crore in April-
May 2020. This sharp increase was driven by an increase in collections for all direct and
indirect taxes over the corresponding period in the previous year. The Non-tax Revenue during
the first two months of FY 2021-22 increased by 976.2 per cent over the same period last year
due to the RBI’s surplus transfer of Rs 0.99 lakh crore to the Government.

22
50. On the expenditure side, a YoY contraction of 6.6 percent was seen for the total
expenditure during April-May 2021. The revenue expenditure during this period saw a YoY
decline of 9 per cent, which was led by a 7 per cent YoY contraction in major subsidies.
However, the focus on capital expenditure continued as it registered a 14 per cent YoY growth
during April-May 2021. The key sectors which contributed to the increase in capex during
April-May 2021 were Road transport and highways with a 91 per cent YoY increase in capex,
and Railways with a 26 per cent YoY increase in capex. Moreover, in order to incentivise the
State Governments to focus on capex, the Centre has decided to continue the scheme for 50-
year interest free capex loans to state Governments during the current fiscal year and has
provided for an additional amount of up to Rs 15000 crore to the States under the scheme. The
emphasis on capex will be pivotal in bringing back the economy on a high growth trajectory,
thereby facilitating buoyant revenues and a sustainable fiscal path in the medium term.

Trend in Government Expenditure

400 Capital Expenditure Revenue Expenditure Total Expenditure
YoY growth in per cent

300

200

100

-100
Sep/20

Feb/21
Jun/20

Oct/20
Apr/20

Mar/21
Aug/20

Nov/20

Dec/20

Apr/21
May/20

Jul/20

May/21
Jan/21

Source: CGA

51. Regarding, the overall trends of Government of India’s debt, total liabilities (including
liabilities under the ‘Public Account’) of the Government, as per provisional data, increased to
₹116,21,781 crore at end-March 2021 from ₹109,26,322 crore at end-December 2020. This
represented a quarter-on-quarter increase of 6.36 per cent in Q4 FY21. Public debt accounted
for 88.10 per cent of total outstanding liabilities at end-March 2021. The weighted average
yield on primary issuances of dated securities showed an increase to 5.80 per cent in Q4 of
FY21 from 5.68 per cent in Q3 FY2. The weighted average maturity of issuances of dated
securities was lower at 13.36 years in Q4 of FY21 (14.96 years in Q3 of FY21). The weighted
average maturity of outstanding stock of dated securities was higher at 11.31 years in Q4 of
FY21 as compared to 11.33 years in Q3 of FY21.
Economic relief package of ₹6.29 Lakh crore to combat the Second Wave
52. A slew of measures to provide relief to diverse sectors affected by the 2nd wave of
COVID-19 pandemic were announced on 28th June 2021. A total of 17 measures amounting to
₹6,28,993 crore were announced to prepare the health systems for emergency response and
provide impetus for growth and employment.

23
Area/ Sector Measures Undertaken
Credit Support ₹1.1 Lakh Cr Loan Guarantee Scheme
Health Sector: ₹50,000 crore
▪ Guarantee cover (50% for expansion and 75% for new project) to max. of
₹100 crore loan for a duration of 3 years with a bank charge upto 7.95%
(lower than normal bank rate of 10-11%).

Other Sectors: ₹60,000 crore

▪ Loans for other sectors will be available with an interest cap of 8.25% p.a.

Additional ₹1.5 lakh Cr for Emergency Credit Line Guarantee Scheme

Credit Guarantee Scheme for Micro Finance Institutions (MFIs)

▪ Guarantee provided to SCBs for loans to new or existing NBFC-MFIs or
MFIs for on lending upto ₹1.25 lakh to approximately 25 lakh small
borrowers.
▪ Loans from banks to be capped at MCLR plus 2%. Maximum loan tenure
will be 3 years, and 80% of assistance to be used by MFI for incremental
lending
▪ All borrowers (including defaulters upto 89 days) eligible
▪ Guarantee cover will be available for funding provided by MLIs to
MFIs/NBFC-MFIs till March 31 2022 or till guarantees for an amount of
₹7,500 crore are issued, whichever is earlier.
▪ Guarantee will be provided upto 75% of default amount for upto 3 years
through National Credit Guarantee Trustee Company (NCGTC)
Restoring Extension of Aatma Nirbhar Bharat Rozgar Yojana (ANBRY) till 31 March
employment
Support to Farmers Additional Subsidy of ₹9,125 crore for DAP & ₹5,650 crore P&K fertilizers
and ensuring food
security 5 kg free food grains under Pradhan Mantri Garib Kalyan Yojana (PMGKY) from
May to November 2021 bringing the total cost of PMGKY to Rs 2,27,841 crore.
Reviving Tourism Financial Support
▪ The scheme will cover 10,700 Regional Level Tourist Guides recognised by
Ministry of Tourism (MoT) and Tourist Guides recognised by the State
Governments; and about 1,000 Travel and Tourism Stakeholders (TTS)
recognized by MoT.
▪ TTS’s will be eligible to get a loan upto ₹10 lakh each while tourist guides
can avail loan upto ₹ 1 lakh each.
▪ There will be no processing charges, waiver of foreclosure/prepayment
charges and no requirement of additional collateral.

Free one month tourist visa to 5 lakh tourists

Strengthening Public ₹23,220 crore more for strengthening public health infrastructure and human
Health resources with emphasis on children and paediatric care/paediatric beds
Impetus for Growth Fighting Malnutrition and Improving Farmers’ Income: Release of Climate
& Employment Resilient Special Traits Varieties

Revival Package of ₹77.45 crore of North-Eastern Regional Agricultural Marketing

Corporation (NERAMAC)

24
 ₹33,000 crore Boost for Project Exports through National Export Insurance Account
(NEIA) over 5 years

₹88,000 crore boost to Export Insurance Cover over 5 years

Digital India: ₹19,041 crore for Broadband to each Village through BharatNet PPP
Model

Extension of PLI Scheme for Large Scale Electronics Manufacturing till 2025-26

₹3.03 lakh crore (with Central share of ₹97,631 crore) for Reform-Based Result-
Linked Power Distribution Scheme

Creation of new policy to streamline process for PPP Projects and Asset
Monetization

Outlook
53. Resilient tax collections of the Central Government in the first two months of FY 2020-
21 and sustained momentum in capital expenditure, particularly in the road and rail sector,
augurs well for pivoting targeted fiscal support for continued economic recovery. The recently
announced economic relief package is expected to further oil the wheels of the capex cycle via
implementation of the PLI scheme and streamlining of processes for PPP Projects and Asset
Monetization. Consumption sentiment is expected to pick up with further enhancement of
employment support under Aatma Nirbhar Bharat Rozgar Yojana (ANBRY) and wider Bharat-
Net digitisation coverage. Free food-grain and enhanced fertilizer subsidies under the package
along with continued MGNREGA implementation, on the other hand, would serve as a cushion
for rural demand in the coming quarters. Maintaining a rapid pace of the vaccination drive and
quickly bridging health care infrastructure gaps across both urban and rural areas would emerge
as the most sustainable stimulus for durable recovery of the Indian economy.

****

For any queries, you may contact the team:

1. Ms. Surbhi Jain, Economic Adviser (E-mail: surbhi.jain@nic.in)
2. Ms. Tulsipriya Rajkumari, Deputy Director (E-mail: tulsipriya.rk@nic.in)
3. Ms. Sanjana Kadyan, Deputy Director (E-mail: sanjana.kadyan@gov.in)
4. Ms. Deeksha Supyaal Bisht, Assistant Director (E-mail: deeksha.bisht@gov.in)
5. Ms. Sonali Chowdhry, Consultant (E-mail: sonali.chowdhry@nic.in)
6. Shri Narendra Jena, Economic Officer (E-mail: jena.narendra@nic.in)

25
 Scale
YoY
-884 0 7759
growth

Movement in India’s high frequency indicators

Indicator Mar-20 Jun-20 Sep-20 Dec-20 Jan-21 Feb-21 Mar-21* Apr-21* May-21* Jun-21*
Agriculture
Tractor sales (Numbers) 31232 92888 108585 61249 78345 75645 85076 63422 55609
Fertilisers sales (Lakh MT) 29 69 47 74 61 46 42 20 31 66
Industry
8-Core Industries (Index) 134 116 121 136 139 128 149.2 130.7 125.8
IIP-Consumer Durable goods 83 78 129 124 124 125 128.9 112.4
IIP-Consumer Non-Durable goods 122 148 147 159 148 147 155.2 142.3
#
Domestic Auto sales (Lakh) 10 11 21 14 17 17 18 13 4
Passenger vehicles sales (Lakh) 1.4 1.1 2.7 2.5 2.8 2.8 2.9 2.6 0.9
PMI Manufacturing (Index) 51.8 47.2 56.8 56.4 57.7 57.5 55.4 55.5 50.8 48.1
Power supply (Mega Units) 107 114 122 115 111 105 123 119 110 115
Natural gas production (Mn. Cu. Mt) 2327 2250 2228 2355 2478 2235 2612 2583 2660
Cement production (‘000 Tonnes) 24818 26358 24244 28266 29563 29038 32874 29391 24222
Steel consumption (‘000 Tonnes) 6742 6350 8179 10163 10025 9515 9354 8558 8130 8160
Services
Domestic air passenger traffic (Lakh) 150 39 78 144 152 154 153 110.851 39.596
Port cargo traffic (Million Tonnes) 61 49 54 63 64 59 72 62 60
Rail freight traffic (Tonnes) 103070 93580 102300 118290 119790 112330 122190 111470 114800 112780
PMI Services (Index) 49.3 33.7 49.8 52.3 52.8 55.3 54.6 54.0 46.4 41.2
Fuel consumption (Thousand MT) 15931 16093 15477 18618 18010 17212 18775 17013.3 15106
UPI Digital Payments (Rs Lakh Crore) 2.1 2.6 3.3 4.2 4.3 4.3 5.0 4.9 4.9 5.5
UPI Digital Payments (Crore) 125 134 180 223 230 229 273 264 254 280
 Indicator Mar-20 Jun-20 Sep-20 Dec-20 Jan-21 Feb-21 Mar-21* Apr-21* May-21* Jun-21*
Inflation
WPI (Base 2012=100) 120.4 119.3 122.9 125.4 126.5 127.3 129.3 131.7 132.7
CPI (Base 2012=100) 148.6 151.8 156.4 157.3 156.3 156.6 156.8 157.8 160.4
CPI food (Base 2012=100) 147.8 153.4 161.6 160.6 156.4 155.5 155.1 156.4 159.4
Crude price Brent Dubai WTI (USD/ Barrel) 32.2 39.5 40.6 48.7 53.6 60.5 63.8 63 66.4 71.8
Crude oil Indian basket (USD/ Barrel) 33.3 40.6 41.4 49.9 54.6 61.2 64.7 63.3 67 72
External Sector
Merch Exports (USD Billion) 21.5 22 27.6 27.1 27.4 27.9 34.5 16 8.1 29.7
Non-oil exports (USD Billion) 19 20.1 24 24.8 25.3 25.2 30.8 20.4 8.1 27.3
Non-oil non gold imports (USD Bn) 20.2 15.7 24.1 28.5 28.5 26.3 29.6 28.6 28.4 27.6
Baltic Dry Index 601 1146 1399 1244 1658 1500 2018 2164 2965
Exchange Rate (INR/USD) 74.4 75.7 73.5 73.6 73.1 72.7 72.8 74.5 73.3 73.4
NEER (40 currency, trade based, 2015-16=100) 95.2 93.1 94.8 93 93.7 94.2 95 92.8 94
Net FDI (USD Billion) 4.0 -0.8 2.9 6.5 3.5 -2.9 2.0 2.8
Net FPI (USD Billion) -15.2 3.1 -0.3 9.6 2.0 3.3 2.3 -1.2 -0.3 1.8
Fiscal
Gross tax revenue (Rs. Lakh crore) 3.3 1.4 2.2 2.8 1.5 1.3 2.6 1.5 2.0
Capital Expenditure (Rs. Crore) 32091 33067 31389 67816 53134 43160 19553 47126 15835
GST collection (Rs. Lakh Crore) 0.98 0.91 0.95 1.15 1.20 1.13 1.24 1.41 1.03 0.93
Monetary and Financial Markets
M3 (Rs. Lakh crore) 168 173 177 181 184 186 188 188 189 192
Non-food credit (Rs. Lakh crore) 103 102 102 105 106 107 107 108 107
Sensex (Index) 29468 34916 38068 47751 46286 49100 49509 48782 51937 52483
Nifty 50 (Index) 8598 10302 11248 13982 13635 14529 14691 14631 15583 15722
Note: * Growth calculated over 2019 value.

27