Businesses stare at losses due to lockdown: Nomura

NEW DELHI: While lockdowns appear to be moderating coronavirus caseloads in India, it also comes at the cost of mobility, brokerage and investment bank Nomura said on Monday. Also, the extension of statewide curbs till May-end in most states means more pain is expected going forward, it said.

“However, international experience suggests gross domestic product (GDP) growth is less sensitive to lower mobility during the second wave. We maintain our 2021 GDP growth forecast, which we recently reduced to 9.8% year-on-year from 11.5%,” Sonal Verma and Aurodeep Nandi, economists at Nomura wrote in a note.

The Nomura India Business Resumption Index (NIBRI) fell to 61.9 for the week ending 16 May from 66.1 in the prior week (38.1 percentage points below pre-pandemic levels). The index is now at levels last seen in June 2020 before it fully recovered in February.

The drop continues to be driven by a sharp fall in mobility. Google’s workplace and retail and recreation mobility indices fell by 5 percentage points and 8.4 percentage points, respectively, from the prior week, while the Apple driving index fell by 3.4 percentage points. Power demand continued to decline by 4% weekon-week for the fourth consecutive week. The labour participation rate moderated to 40.5% from 41.3% last week, with the unemployment rate rising to 14.4% from 8.7%.

Meanwhile, Morgan Stanley expects cyclical recovery trend to continue this year following a sequentially weaker second quarter due to Covid-related restrictions. Ramping up of vaccinations, alongside a favourable policy mix and robust global growth outlook, will drive the cyclical recovery.

However, a prolonged slowdown may create credit stress, leading to premature tightening of financial conditions, it warned. They expect inflation to remain above the central bank’s target in 2021 and 2022, and see starting of a rate hike cycle from the fourth quarter of 2021.