MUMBAI: The lockdowns imposed by the states in April and May to contain the second wave of the deadly Covid-19 pandemic likely caused the economy to contract 12 percent in the June quarter, down from 23.9 percent in the same quarter in 2020. says a realtor report.
The economy posted its worst decline on record at 7.3 percent in FY21, as the 2.5-month unplanned lockdown announced by the center with just a four-hour announcement drove the economy down by a massive 23 percent in the first quarter. 9 percent had paralyzed, which improved to -17.5 percent in the second quarter.
But the economy showed a sharp V-shaped rebound from the second half of the year, when it posted positive growth of 40 basis points and stood at 1.6 percent in the fourth quarter, curling the overall decline for the year to 7.3 percent.
That 12 percentage point drop will cause the economy to miss a sharp V-shaped rebound this time around, unlike last year after the national lockdown was lifted, as consumer sentiment remains very weak this time as people become more concerned about the Make pandemic last year, says Swiss broker UBS Securities India.
Tanvee Gupta Jain, an economist at Swiss brokerage, cites internal data from the UBS India activity indicator and says the indicator suggests that economic activity contracted by an average of 12 percent in June 2021, compared to 23.9 percent in the June quarter of 2020.
This despite the fact that the indicator rose to 88.7 in the week ending June 13, an increase of 3 percent compared to the previous week after many states eased local mobility restrictions since the last week of May.
Although the broker expects economic activity to pick up sequentially from June onwards, he does not believe that the economy could pick up until the second half of the year.
In contrast to the V-shaped recovery in 2020, we expect the economy to recover only gradually this time as consumer sentiment remains weak due to pandemic uncertainties. However, we expect the economic recovery to gain momentum from the second half of the year as vaccinations surge and the resulting control of the pandemic reduces consumer and business confidence, she said.
The lockdown in the second wave lasted just over a month versus 2.5 months in the first wave and industry / construction activities were allowed to a limited extent this time.
We continue to expect only a sequential recovery in economic activity from June and not a V-shaped recovery like in 2020, she added.
Significantly, there is a positive momentum on the ground on the vaccination front, which has improved from 2.5 million at the end of May to 3.2 million doses daily in the week up to June 13th.