The Reserve Bank of India (RBI) on Wednesday said the second Covid wave was “rolling back as fast as it rolled in” — stoking cautious optimism of the possibility of a rebound by early July.

Such a recovery, however, will rest on the speed and scale of vaccination in the country, the apex bank said in its June bulletin.

The document said the Indian economy has the resilience and possesses the fundamentals to bounce back from the pandemic and unshackle itself from pre-existing cyclical and structural hindrances.

Earlier this month, the RBI trimmed its growth forecast for the current fiscal to 9.5 per cent from 10.5 per cent. Its latest observation comes at a time the states are reporting a lower number of daily cases though fatalities remain a matter of concern. There are also apprehensions about a third wave and the states have started their preparations to counter such a possibility.

According to the RBI, the second wave of the coronavirus has largely affected domestic demand, while spreading into smaller cities and villages. Further, the support from the government spending may moderate from the extraordinary expansion undertaken last year.

On the brighter side, agriculture and contactless services are holding up, while industrial production and exports have risen despite pandemic protocols, albeit on a low base.

The central bank again reiterated the importance of the rollout of the vaccination programme across the country.

“It is vaccination which will shape the recovery. The economy has the resilience and the fundamentals to bounce back from the pandemic and unshackle itself from pre-existing cyclical and structural hindrances,’’ the bulletin said.

The report cautioned that vaccines will not end the pandemic by themselves.

“We have to learn to live with the virus, complementing vaccines with ramping up investment in healthcare, logistics and research.”

“The pandemic is a real shock with real consequences. Hence, there is a need to ensure that the recovery is built on a solid foundation of business investment and productivity growth,” the RBI said.

Production shift

Changes in lifestyle and work practices such as increased remote work and online shopping are likely to continue. Further, when patterns of demand shift, some firms may face closure and some industries may become permanently smaller.