The New COVID-19 wave hampers India’s economic growth prospects
As India witnesses a surge in COVID-19 cases, state governments are imposing partial lockdowns
After months of Coronavirus pandemic-induced lockdown, India’s economy started to pick up pace this year. According to economists, a significant rise in consumer demand and government spending facilitated economic growth from a rare recession in the past few months.
However, a new wave of COVID-19 outbreak in recent weeks has threatened the country’s economic growth prospects. India witnessed more than 55,000 new COVID-19 cases on average daily in March as compared to 16,000 in January. An unprecedented surge in infected cases has necessitated a number of state governments to impose curfews and suspend economic activities. New lockdowns can significantly hurt businesses that are still recovering from the repercussions of the COVID-19 lockdown last year. Leading sectors including retail, tourism, and hospitality have been hard hit by the second wave of COVID-19.
Grappling with a rapid rise in COVID-19 infections, the Maharashtra government has put some districts across the state under lockdown to curb the spread of the virus. Other states such as Kerala, Punjab, Gujarat, and Karnataka are also imposing related restrictions at the local level as they continue to report an increase in daily cases. These restrictions include night curfews, a limited entry in restaurants, malls, and public spaces, weekend lockdowns, and caps on the number of guests at weddings and events.
In a recent report, Barclays India has noted that if existing restrictions will continue to persist for the next two months, India could face a decrease of 0.17 percentage points in its nominal GDP growth. The Centre for Monitoring Indian Economy (CMIE) also underlined that urban joblessness increased in March as the unemployment rate climbed to 7.24 percent. Analysts at Nomura Holdings Inc. have also noted that the rise in COVID-19 cases has started to impact mobility and economic activities in the country.
An annual survey by the United Nations Economic and Social Commission for Asia and the Pacific (ESCAP) has also indicated that India’s 2021 economic output is expected to remain below the 2019 level, despite efforts to reduce new cases and the roll-out of a robust vaccination campaign.
Meanwhile, India has expanded its nationwide vaccination drive to include every individual above the age of 45 with effect from April 1. According to a Reuters report, continuous efforts to vaccinate the population can help in avoiding a complete lockdown in the country.
“The biggest risk to economic recovery would be in case there is greater evidence of reinfections from the new strains of the virus that also turn out to be less deterred by the existing vaccines,” said Abhishek Upadhyay, senior economist at ICICI Securities, while speaking to Reuters.