India’s record-breaking second Covid-19 wave, which threatens to derail the global economic recovery, has now put the International Community on red alert.
- Amid a second wave and crumbling health infrastructure, India is now reporting an average of 250,000 new cases every day.
- The surge has forced the hand of several states, prompting curbs on mobility as well as business operations.
- A new Barclays report suggests that the Indian economy stands to lose an average of $1.25 billion every week.
- By May end, the collective commercial and economic losses could mount to $10.5 billion.
- The unemployment rate in the country has climbed from 6.7 percent to 8.6 percent in just two weeks.
After an exhausting year of battling the COVID-19 pandemic, we entered the New Year with renewed hope. The cases were on a steady decline. There were vaccines on the horizon. Just when it seemed that the worst was behind us, the tide turned. India dropped the ball in its handling of the crisis, resulting in a renewed spike in coronavirus infections being reported from mid-March. A month later, we’re now dealing with more than 2.5 lakh fresh cases every day. Even as a large cross-section of the population is struggling to cope with the unfolding disaster, another is taking shape in the backdrop. As states scramble to impose night curfews, restrictions and full-blown weekly lockdowns, the Indian economy, still battered from last year’s nationwide shutdown, is taking a fresh hit with the deadly second Covid-19 wave.
Fresh Lockdowns will Cost the Economy $1.25 Billion a Week
The surging coronavirus cases has forced the hand of many states, prompting curbs on mobility as well as business operations. Even though the restrictions are more localised this time around, the ripple effect on the economy will be far-reaching. According to a report released by Barclays, Indian economy stands to lose an average of $1.25 billion every week, with the Q1 nominal GDP being slimmed down by 140 bps.
Watch: Can India’s battered Economy withstand the havoc of the Second Covid Wave?
According to Rahul Bajoria, the chief economist at Barclays India, who co-authored the report with Shreya Sodhani, the collective loss in commercial and economic activity could mount to $10.5 billion, amounting to 34 bps of the nominal GDP, if the current curfews and lockdowns remain in place till May end.
As India now leads the fresh virus case load globally, the economic situation is made more precarious by the fact that the rising infections are concentrated in its key economic hubs such as Maharashtra, Delhi, Gujarat, Tamil Nadu and Rajasthan. This can predictably lead to a steep dip in activity on account of curtailed mobility. With states like Delhi and Maharashtra now imposing full lockdowns, barring essential services, GVA losses to the tune of Rs 40,000 crore are expected. As per the report, any extension beyond the expected timeframe of May-end can further compound the output losses.
April of 2021 is turning into a déjà vu moment, even as daily wagers and migrant labourers line-up railways stations and bus stands to return to their native places. These images of another annual journey back home correspond with reports of rising unemployment as a result of freshly imposed restrictions.
According to the latest data released by Mumbai-based think tank Centre for Monitoring Indian Economy, the unemployment rate in the country has climbed from 6.7 per cent to 8.6 per cent in just two weeks. Economists predict that the rising cases, ensuing clamp down measures to break the chain of transmission, could lead to a sharp jump in job losses. In April 2020, the CMIE reported that the imposition of nationwide lockdown had brought the employment rate down from 40% in February to 26% by the third week of April.
CMIE Managing Director and CEO had said at the time that with the working age population in the range of a billion, a 14% loss in employment meant millions of people losing their means of livelihood. In the second Covid-19 wave, apart from job losses in the Indian gig sector or informal economy, those working in aviation, tourism, hospitality, travel and entertainment could also be hard hit.
Business in Losses
Traders and businessmen, in particular, have been severely affected by the measures being taken to curb the coronavirus spread from raging like wildfire. According to the Confederation of All India Traders Association (CAIT), night curfews and partial lockdowns have already resulted in cumulative losses of Rs 46,000 crore in a span of 10 days.
Praveen Khandelwal, secretary general of the traders’ body, said that these figures pertain to losses being reported from nine key states in the country. The data is from Maharashtra, Delhi, Chhattisgarh, Gujarat, Karnataka, Punjab, Rajasthan, Madhya Pradesh and Uttar Pradesh –based on the inputs of prominent local trade organisations and leaders.
This resurgence, if not contained quickly and pragmatically, will deal a catastrophic blow to the Indian economy. This second Covid-19 wave threatens to send the Indian economy spiralling down the path of a long and painful recovery.
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