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The US Treasury Department has said in a report submitted to Congress that despite three strong COVID-19 waves, the Indian economy has made a strong comeback. In its semi-annual report, the Treasury said that although the second wave in India put huge pressure on growth until mid-2021, delaying the economic recovery, it is now on the right track.
Vaccination campaign praised
The US Treasury on Friday praised India’s immunization efforts, saying there was a strong jump in economic activity in the second half of the last financial year, with a spurt in the vaccination rollout. By the end of 2021, about 44 percent of India’s population had been fully vaccinated. It said that after a seven per cent decline in 2020, production returned to pre-pandemic levels by the second quarter of 2021, registering a full year growth of eight per cent. Referring to the third wave of corona in the report, it was said that since the beginning of 2022, India has faced a major outbreak of the Omicron variant, but the number of deaths and the macroeconomic fallout have been limited.
Appreciate the steps taken by the government
The report said the government continued to provide financial support to the economy in 2021 against the backdrop of the pandemic. It projected that the overall fiscal deficit for the 2022 fiscal year would reach 6.9 per cent of GDP, which is higher than the pre-pandemic deficit. Referring to the RBI’s efforts, the Treasury said the Reserve Bank of India kept its key policy rates unchanged at four per cent from May 2020, but in January 2021 with exceptional liquidity designed to support growth during the early part of the coronavirus pandemic. The measures were gradually opened up.
Import and export improved
In addition, goods imports grew particularly sharply in the second half of 2021 amid an economic recovery and rising commodity prices, especially energy prices, leading to a 54 percent year-on-year increase in imports in 2021. India’s exports also increased in 2021, although at a lower rate than imports, registering a growth of 43 percent. The department said India’s services trade surplus (3.3 per cent of GDP) and income surplus (1.3 per cent of GDP) partly offset the wider goods trade deficit.
Increase in bilateral trade surplus
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. India’s bilateral goods trade surplus reached $33 billion (up 37 percent), while the bilateral services surplus rose to $12 billion (up 29 percent) in 2021. The Treasury said the expansion was primarily driven by increased US demand.
Ranked in top 12 economies of the world
India retained its position on the currency monitoring list of the US Treasury Department on Friday. The Treasury Department said that India met two of the three criteria in the December 2021 and April 2021 reports. It had a significant bilateral trade surplus with the US. Washington has placed India along with 11 other major economies that are considered strong in their currency and macroeconomic policies.
These countries including China-Japan in the list
The monitoring list includes China, Japan, South Korea, Germany, Italy, India, Malaysia, Singapore, Thailand, Taiwan, Vietnam and Mexico. The US Treasury Department in its semi-annual report presented a detailed report on foreign exchange policies. Regarding this, it was said by the Treasury Department that except Taiwan and Vietnam, all the countries were on the monitoring list in the report of December 2021. Explaining her decision to keep India on the list, Secretary of the Treasury Janet L Yellen said that India will remain on the watch list for two consecutive reports until it meets no less than two criteria.