SPORADIC LOCKDOWNS TO COST INDIA $1.25 BN/WEEK: BARCLAYS

The sporadic lockdowns/mobility curbs put in place across key economic hubs in India in the past few days are likely to cost the nation $1.25 billion per week, says the latest report dated April 12 from Barclays. This increase, says Barclays, reflects the modest tightening of activity curbs, and the widening geographical spread of the second Covid wave.

“Taking into account rolling Covid curbs, if the current restrictions remain in place until the end of May, we estimate that the cumulative loss of activity could amount to around $10.5 billion, or around 0.34 percentage point (pp) of annual nominal gross domestic product (GDP). However, the impact on the first quarter (Q1) 2021-22 (FY22) nominal GDP is likely to be higher, shaving around 1.4 pp from Q1FY22 nominal GDP,” wrote Rahul Bajoria, chief India economist at Barclays, in the report coauthored with Shreya Sodhani.

In March 2021, Barclays had estimated that the mobility restrictions in place for two months could cost the economy $5.2 billion in lost output, or 0.17 pp of nominal GDP. That said, they have maintained FY22 real GDP growth forecast at 11 per cent year-on-year — at least for now, cautioning against the downside risk if the curbs are tightened further or are imposed across economic hubs in the country.

According to the official data, India recorded a surge of 168,912 Covid-19 cases in the last 24 hours. At the current run rate, it has emerged the second-worst hit nation with 13,527,717 cases in total and the fourthworst hit in terms of active cases.

Against this backdrop, some state governments, including that of Maharashtra and Delhi, have announced mobility curbs. Barclays believes the number of new active cases is likely to stabilise in May, as recoveries catch up with new cases. Moreover, vaccination should also pick up pace.

Almost 60 per cent of India’s economy is now subject to some mobility restrictions, says Barclays, with key economic hubs, such as Maharashtra, Gujarat, Tamil Nadu, and Rajasthan, seeing rising Covid19 cases and falling mobility.

With regard to Maharashtra, the mobility curbs put in place in the wake of rising Covid cases would lead to a dip in gross value added (GVA) growth by 0.32 per cent at the overall domestic economy level in FY22, CARE Ratings had recently estimated. “Against these new guidelines, our projections are that around ~40,000 crore of GVA will be impacted based on a single month of lockdown. Any extension of the same will result in further loss of output from the state,” it said.