On Tuesday, The global rating agency Moody’s Investors Services said the resurging second wave of coronavirus infections in India poses a risk to its growth forecast of 13.7% for FY22 as the re-imposition of stringent measures to control the spread will curb economic activity and could dampen market and consumer sentiment.
Also, it said, “The announced countermeasures to combat the second wave – some of which are due to remain in place at least until the end of April – risk weakening the economic recovery. However, the targeted nature of containment measures and rapid progress on vaccinating the population will mitigate the credit-negative impact.”
Retail and recreation activity around India saw a drop by 25% as of 7 April compared to 24 February, according to Google mobility data. This was also reflected in the Reserve Bank of India’s March consumer confidence survey that showed a decrease in perceptions of the economic situation and expectations of less spending on nonessential items.
Moody’s said if focused on “micro-containment zones” to combat the current wave of infections, opposite to 2020 nationwide lockdown, it expects that the impact on economic activity will be less severe than seen in the last year.
“India’s very low coronavirus death count (only about 170,179 deaths have been recorded as of 12 April) and relatively very young population also help mitigate risks. GDP is still likely to grow in the double digits in 2021 given the low level of activity in 2020,” it added.
The Indian economy contracted 8 per cent in FY 2020-21, as of March 31, 2021, said the official estimates.
The rating agency emphasised that inoculation will play a key role in the management of the second wave as authorities have to balance virus management against maintaining economic activity.
India started its vaccination drive in the middle of January and had administered over 108 million doses of covid-19 vaccine as of 12 April, becoming the first country to run vaccination at a large scale. “However, a shortage of vaccines and India’s nearly 1.4 billion person population, which includes many people living in rural, more remote locations, could slow progress of the vaccine rollout,” Moody’s said.
India has kept domestic vaccination demand in priority, delaying exports, amid the resurgence in coronavirus infections. On 11 April, the government also imposed a temporary prohibition on the export of the medicine- remdesivir, which is used in the treatment of coronavirus patients.
Around 7 per cent of the population has been vaccinated, as per the data available as of early April. From 1 April, the vaccination drive was opened up for all citizens aged 45 years and above, which is about 25 per cent of the population. To mitigate the risk, Workplace vaccination centres were also launched on April 11, through which the government plans to inoculate workers while minimizing risk.
Moody’s said, “Daily new reported cases for the month totalled 1.1 million, jumping from the 0.4 million cases reported in February, which was the lowest since the country’s 2.6 million peaks in September 2020 during the first wave.”
Maharashtra has become the epicentre of the second surge, accounting for close to 50 per cent of the active caseload as of April,12. Besides, Uttar Pradesh, Chhattisgarh, Delhi and Karnataka have reported a sharp rise in daily cases.