Covid curbs start hitting economy; Crisil says rapid vaccination must to avoid deeper pain

NEW DELHI: As many pockets of India continue to be under lockdown, economists have started recording the impact of the same on high frequency indicators.

These signals may force downgrade in GDP growth expectations for the economy, though till a few weeks back many believed the impact won’t be much.

India’s crushing second wave of Covid-19 continues to make new peaks every passing day, as daily cases near the 4 lakh mark. What has been more worrying is that the second wave is now closing in on rural India.

“In India, the impact of state-announced restrictions are more clearly showing up across high frequency indicators – they all trended downward for the second consecutive week,” said Dharmakirti Joshi, Chief Economist at Crisil.

Joshi’s reading showed:

• Retail mobility fell 8.2 percentage point (pp) on average in the week ending May 02 (vs 11.4 pp decline in the week prior)
• Workplace mobility slowed 7.1 pp (7.9pp decline a week ago)
• Toll collection declined 2 per cent on-week (compared to -8 per cent in the week prior)
• Power supply grew by a marginal 0.9 per cent on-week (vs 1.9 per cent contraction a week ago)
• Goods and Services Tax e-way bill collection declined 6.9 per cent on-week for week ending April 25 (vs -6.2 per cent for week ending April 18)
• Railway freight loading fell by 2.1 per cent on-week (week ending May 02) (-0.7 per cent a week earlier)

Along with this, what is more worrying is that daily vaccinations are slowing, as vaccine supplies are choked. They dropped from 1,992 per million in the prior week to 1585 per million on average in the week ending May 2.

This is the third straight week that daily vaccinations have declined. Cumulatively, India has administered 15.4 crore doses this far. Even though the government has announced the third phase of vaccination starting May 1, opening it up for those from 18 years upwards, several states have expressed inability to begin the drive owing to shortage of supplies.

The only silver lining, if one can call it, is that amid the steep rise in daily cases and deaths, growth in recoveries, which lagged new cases till last week, grew faster by 57% in the week from April 26 to May 2, Joshi said.

Growth in daily cases in major affected states, such as Maharashtra, Madhya Pradesh, Chhattisgarh, Uttar Pradesh has slowed down, compared with the week ending April 25.

“If we look at the trend in other countries, as people and businesses learned to live with the virus, economic activity was less impacted,” Joshi said. He said vaccination is the only way that can bring India out of the impending economic crisis.

“As countries vaccinate more, behavioural changes in the form of increased mobility are expected to set in,” said Joshi.

This is already being seen in the US and the UK, which have managed to vaccinate a significant proportion (>40 per cent) of their population, are seeing improvement in people's mobility.