India’s economic recovery has been disrupted by an unprecedented wave of Covid-19 that has forced many states to impose localized lockdowns. As a result, countless companies have been affected, and experts say the situation will get worse if the virus is not contained soon.
In January the government said India’s economy would see one “V-shaped” recovery when economic activity was back in full swing after the first wave. While India’s economy has recovered rapidly in recent months, the second wave has recovered spoiled sentiment and re-tested the fragile economy.
BACK TO SQUARE OR WORSE?
When India faced the first wave of the pandemic, businesses were hit hard as economic activity stalled completely. Although a nationwide lockdown has not yet been imposed, localized restrictions apply Hurting companies as well.
It should be noted that companies were in a much stronger position – both in terms of revenue and cash reserve – when the first wave of the pandemic hit the country. The second wave took them by surprise, however, and most of these companies do not have the resources to maintain another period of prolonged restrictions.
Sectors already under pressure from the restrictions include tourism, hospitality, restaurants, aviation, entertainment, automotive, real estate and construction. Taken together, these sectors contribute to a large part of India’s GDP.
Reading | Explained: How Fresh Covid Curbs Can Be a Killer for the Hospitality Industry
However, the contribution will decrease significantly in most states in the first quarter due to ongoing local restrictions. This should have an impact on Indian GDP growth in the first quarter.
Whether the economic impact of the second wave will be worse than 2020 is difficult to say at the moment, but experts said that will depend on how quickly the second wave can be contained. One thing is certain, however: the second wave of Covid-19 has already dealt a heavy blow to smaller companies that had barely recovered from the 2020 onslaught.
ECONOMY VERSUS COVID TEST
India’s gross domestic product (GDP) could be revised several times in the current financial year if the uncertainty over the second wave increases.
Medical experts have stated that The second wave of Covid-19 could last around 12 weeks;; The economy would suffer for the same amount of time. This indicates that the economic recovery will slow down considerably in the first quarter of the current financial year.
Several brokerage houses have already felt this and have done so lowered India’s GDP forecast for the current fiscal year. Nomura has downgraded its GDP forecast for India from 13.5 percent to 12.6 percent, JP Morgan has cut it from 13 percent to 11 percent and UBS has revised it to 10 percent.
While the above projections don’t look too bad, the GDP figure could be revised again if India doesn’t cap the number of cases soon.
“India is in the midst of a resurgence of Covid-19 cases. The daily number of cases is double what it was in 2020. If efforts to get the virus under control are successful in the coming weeks, we should look into the second Quarter recover from FY 22, “said UBS.
UBS expects mobility restrictions in India to remain in place until at least the end of May and that normal economic activity could return by the end of June.
While the financial services firm suggests that the economic impact “will be much smaller” than in 2020, India’s real GDP could slow by a much greater extent if disruptions persist.
From today’s perspective, India’s economy is facing a tougher challenge from the virus as support mechanisms are likely to be very limited this time around. The only way to avoid a full-blown crisis is to stop the rapidly spreading virus through vaccinations and taking precautionary measures.
Also read | Explained: How Covid Restrictions Damage The Economy During Wave 2
एक टिप्पणी भेजें