The last few months have been great for the economy.New cases have fallen, and economic activity is racing back to pre-pandemic levels. After a c.24% contraction in the quarter ending June 2020, we expect GDP to grow by a positive 1.8% in the quarter ending December 2020. This is quite a sharp turnaround in a short period. A careful look suggests that a key driver of the rebound has been pent-up goods demand. As the lockdown ended, the production of consumer non-durables shot up, followed______________(I)___________. A large mountain of household financial savings funded this rebound. N +5% N% N +20% 2N% Total cookies (Butter + Chocolate) produced A B C D M% 20% 40% M +10% Total chocolate cookies produced A B C D ENGLISH LANGUAGE 11 www.bankersadda.com | www.sscadda.com | www.careerpower.in | Adda247 App Alas, we also find that goods demand is back at prepandemic levels and may not be the key driver of a continued rebound. Thankfully, pent-up services demand can play that role. Still 25% below normal, services can get a shot in the arm as herd immunity rises, in part led by vaccine roll-out. GDP growth is likely to be strong for the next few quarters, rising from -6.3% y-o-y in FY21 to 11.2% y-o-y in FY22. But then, what next? By definition, pent-up demand is a one-time driver of growth. Once services demand is back at pre-pandemic levels, say by end 2021, what will drive growth? It is possible that the scars the pandemic leaves behind will begin to show up around that same time, presenting a double whammy for growth. And this is where the centre stepped in with the budget. It tried to introduce a new narrative for medium-term growth, namely capital expenditure. In particular, it introduced the following: The capex budget was raised by 0.8% of GDP over two years (FY21 and FY22). In fact, only after adjusting for the higher capex multipliers is the FY22 fiscal impulse positive. The government did not impose any new taxes/cesses, nor did it make changes in capital gains tax. Our previous work has shown that policy stability tends to crowd-in private sector capex. The government outline plans to create two new institutions, a bad bank and a DFI, although much will depend on the design and implementation over time. On Feb 5, RBI outlined its role in this new narrative–not being the main driver of growth as it was in 2020, but playing a supportive role and helping it through its largerthan-expected market borrowing. RBI will have to tread the fine line between normalising liquidity (especially with inflation likely to be north of the 4% target over the next year) and maintaining orderly conditions in the bond and FX markets. Liquidity switching could help. For instance, it could use the space freed up by the reversal in CRR cut for bond purchases. Or, in the face of a rising trade deficit and falling BoP surplus, it could focus more on bond purchases than dollar purchases.RBI is expected to start raising the reverse repo rate in 2H2021, the repo rate may remain unchanged at 4% over the foreseeable future, doing its bit for keeping interest rates as low as possible

According to the passage, what can be said about the economy after the pandemic?

Question

The last few months have been great for the economy.New cases have fallen, and economic activity is racing back to pre-pandemic levels. After a c.24% contraction in the quarter ending June 2020, we expect GDP to grow by a positive 1.8% in the quarter ending December 2020. This is quite a sharp turnaround in a short period. A careful look suggests that a key driver of the rebound has been pent-up goods demand. As the lockdown ended, the production of consumer non-durables shot up, followed______________(I)___________. A large mountain of household financial savings funded this rebound. N +5% N% N +20% 2N% Total cookies (Butter + Chocolate) produced A B C D M% 20% 40% M +10% Total chocolate cookies produced A B C D ENGLISH LANGUAGE 11 www.bankersadda.com | www.sscadda.com | www.careerpower.in | Adda247 App Alas, we also find that goods demand is back at prepandemic levels and may not be the key driver of a continued rebound. Thankfully, pent-up services demand can play that role. Still 25% below normal, services can get a shot in the arm as herd immunity rises, in part led by vaccine roll-out. GDP growth is likely to be strong for the next few quarters, rising from -6.3% y-o-y in FY21 to 11.2% y-o-y in FY22. But then, what next? By definition, pent-up demand is a one-time driver of growth. Once services demand is back at pre-pandemic levels, say by end 2021, what will drive growth? It is possible that the scars the pandemic leaves behind will begin to show up around that same time, presenting a double whammy for growth. And this is where the centre stepped in with the budget. It tried to introduce a new narrative for medium-term growth, namely capital expenditure. In particular, it introduced the following: The capex budget was raised by 0.8% of GDP over two years (FY21 and FY22). In fact, only after adjusting for the higher capex multipliers is the FY22 fiscal impulse positive. The government did not impose any new taxes/cesses, nor did it make changes in capital gains tax. Our previous work has shown that policy stability tends to crowd-in private sector capex. The government outline plans to create two new institutions, a bad bank and a DFI, although much will depend on the design and implementation over time. On Feb 5, RBI outlined its role in this new narrative–not being the main driver of growth as it was in 2020, but playing a supportive role and helping it through its largerthan-expected market borrowing. RBI will have to tread the fine line between normalising liquidity (especially with inflation likely to be north of the 4% target over the next year) and maintaining orderly conditions in the bond and FX markets. Liquidity switching could help. For instance, it could use the space freed up by the reversal in CRR cut for bond purchases. Or, in the face of a rising trade deficit and falling BoP surplus, it could focus more on bond purchases than dollar purchases.RBI is expected to start raising the reverse repo rate in 2H2021, the repo rate may remain unchanged at 4% over the foreseeable future, doing its bit for keeping interest rates as low as possible

According to the passage, what can be said about the economy after the pandemic?

Accepted Answer

**Solution:**

1. The passage clearly states that "The last few months have been great for the economy. New cases have fallen, and economic activity is racing back to pre-pandemic levels."

2. Option (a) is incorrect because it claims new cases have risen, which contradicts the passage.

3. Option (b) mentions services still being 85\% below normal, but the passage states services are 25\% below normal.

4. Option (c) correctly reflects the passage's statement about economic activity recovering to pre-pandemic levels.

5. Option (d) is incorrect as (a) is false.

**Answer:** Economic activity is racing back to pre-pandemic levels.

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