The Reserve Bank of India on Wednesday said that the country’s economy could suffer a loss of Rs 2 lakh crore in output the current financial year as a result of the second wave of the coronavirus pandemic. The central bank made the estimate in its monthly bulletin for June, assuming that the impact of the second wave will be contained in the first quarter (April-June) of the fiscal.

Noting that domestic demand was hit the worst due to the pandemic, the RBI observed that the Indian economy continues to wrestle with the second wave even though cautious optimism is returning. In contrast to moderation in domestic demand, agriculture and contactless services are holding up, while industrial production and exports have surged compared to last year amidst pandemic protocols, the bulletin stated.

The RBI, however, added that economic recovery will depend on the speed and scale of vaccination in the country.

“Going forward, the speed and scale of vaccination will shape the path of recovery,” it said in the bulletin. “The economy has the resilience and the fundamentals to bounce back from the pandemic and unshackle itself from preexisting cyclical and structural hindrances.”

The RBI document also noted the impact of the second wave on bank deposits and currency holding with the public, as both the figures dipped in April. Currency holding decelerated significantly to 1.7% during April 2021 in comparison to the growth of 3.5% a year ago, implying heavy outgo towards Covid-induced medical expenditure, RBI data showed.

Observing that the pandemic is a “real shock with real consequences”, the RBI bulletin warned that some sectors may continue to suffer due to the change in demand patterns. “Life- and work-style transformation such as increased remote work and online shopping may likely endure,” it said. “When patterns of demand shift, some firms may face closure”.

The central bank maintained its earlier stated growth rate estimate of 9.5% and consumer inflation forecast of 5.1% in the financial year 2021-’22.