Second wave hurts business resumption, lockdowns may soften economic growth in June quarter: Analysts

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Mumbai: The rise in COVID-19 infections led to the steepest decline in economic activity since mid-April last year, and the lockdowns announced by Maharashtra will accentuate the already impacted retail and recreation mobility, analysts said on April 5.

Japanese brokerage Nomura said a proprietary tool to gauge business resumption has dropped sharply to 90.7 for the week ended April 4, the steepest fall since mid-2020. It said the Nomura India Business Resumption Index (NIBRI) had been rising every month since April.

“Given the continued rise in cases and the likelihood of more state-wide restrictions, we expect softer sequential growth in Q1 FY22 but view the medium-term impact as limited,” it said.

The fall was driven by a sharp deterioration in mobility data, the brokerage said, attributing it to both local restrictions and possibly more cautious consumer behaviour amid the second wave. It can be noted that various pockets in the country, especially urban centres in Maharashtra like Pune had been having localised restrictions for over a week now. On April 4, Maharashtra announced far-reaching lockdown measures across the state to mitigate the spread of COVID.

“At the all-India level, mobility to retail and recreation spaces remained relatively unaffected ever since the surge in cases began in mid-February. However, mobility in more-affected states, particularly Maharashtra, is beginning to weaken. The fresh round of restrictions in Maharashtra will accentuate this,” rating agency Crisil’s research wing said in a note.

The note added that the economic impact of the localised lockdowns has been “minimal” so far.

Analysts at Nomura said unlike the sharp falls in mobility data, the impact on real activity appears less severe and pointed out to power demand which fell by only 1% as compared to preceding week and a stable labour participation rate.

The note from Crisil said after being concentrated in Maharashtra, new cases are slowly dispersing to other states which have seen some dip in mobility towards end-March.

Crisil said the vaccination programme has also been progressing at a slow speed so far, with only 5.5 doses administered per 100 people as against the world average of 8.3, and will pick-up pace from April as the inoculation has opened up for those above 45 years.

Total number of persons vaccinated, at 7.9 crore (as of April 4), is more than six times the total infected (1.2 crore), it said.

Chhattisgarh, Gujarat, Punjab and Madhya Pradesh are accounting for a lower share, they have seen the highest growth rate in new cases in the week after Maharashtra, it said.