Second wave threat to recovery, says Moody’s

GDP still likely to grow in double digits in 2021

The second wave of coronavirus infections poses threat to economic recovery in India, said Moody’s. The surge in cases presents a risk to growth forecast as the re-imposition of virus management measures will curb economic activity and could dampen market and consumer sentiment. However, given the focus on “micro-containment zones”, the impact on economic activity will be less severe than in 2020.

The second wave of coronavirus (Covid-19) infections poses threat to economic recovery in India, according to global rating agency Moody’s.

The surge in infections presents a risk to growth forecast as the re-imposition of virus management measures will curb economic activity and could dampen market and consumer sentiment.

However, given the focus on “micro-containment zones” to deal with the current wave of infections, as opposed to a nationwide lockdown, the impact on economic activity will be less severe than that seen in 2020.

India’s coronavirus death count and relatively very young population also help mitigate risks. The country’s gross domestic product (GDP) is still likely to grow in double digits in 2021 because of the low level of activity in 2020.

Retail and recreation activity across India had dropped by 25 per cent as of April 7, compared to February 24, according to Google mobility data. This was mirrored in the Reserve Bank of India’s March consumer confidence survey, which showed a deterioration in perceptions of the economic situation and expectations of decreased spending on nonessential items, it added.

India began its vaccination drive in mid-january and had administered 100 million doses of the coronavirus vaccine as of April 10, becoming the fastest country to reach that threshold so far.

However, a shortage of vaccines and India’s nearly 1.4 billion population, which includes many people living in rural, more remote locations, could slow progress of the vaccine roll-out.