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The RBI in an article on the 'State of Economy' has said that the economy is gaining traction with gradual pick up in manufacturing activity and moderation in contraction of services, spurred by comfortable liquidity conditions. Observing that the retreat of the second wave of coronavirus pandemic has been slow, it said, the aggregate demand conditions are buoyed by the release of pent-up demand post unlock, while the supply situation is improving with the monsoon catching up to its normal levels and sowing activity gaining pace.

The article noted that with the cautious unwinding of restrictions by states, human mobility has risen to levels last seen in February 2021, prior to the onset of the second wave. Electricity generation readings, too, have recovered to peak levels seen in April 2021 and are closing on to the pre-pandemic level (July 2019). As per the article, fuel consumption recorded an uptick in July 2021. While the consumption of petrol reached pre-pandemic levels and aviation turbine fuel (ATF) recorded a sequential improvement, diesel consumption slipped marginally.

On the price rise front, the article said the headline CPI inflation for July 2021 came in at 5.6 per cent, down 70 bps from 6.3 per cent a month ago and ‘reinforcing the view that the recent upsurge has peaked and the worst would be behind us’. Further, it said high frequency food price data from the Department of Consumer Affairs indicate an uptick in cereal prices in August so far. Prices of pulses, on the other hand, continue to soften. Edible oil prices are seeing some pressures. Among key vegetables, prices of potatoes, onions and tomatoes saw some seasonal increase in prices.