India’s rising virus cases risk denting economic recovery

24 March, 2021 12:00 AM printer

NEW DELHI: A surge in coronavirus cases in India could hurt the economy’s recovery from a rare recession, as curbs to avoid a new wave creates delays in putting back to work millions who lost their jobs due to the pandemic.

In recent weeks, new coronavirus cases have shot up across India despite a rollout of a nationwide vaccination drive. Confirmed infections have risen to more than 40,000 daily from a low of about 9,800 in February, pushing the overall tally past the 11.5 million mark, report agencies.

Unlike other Covid-19 hit regions such as Europe, India has so far been reluctant to reimpose any more harsh restrictions. Around this time last year, Prime Minister Narendra Modi ordered a strict national lockdown with just a few hours notice, inadvertently causing an exodus of millions of city-dwelling laborers back to their villages rather than starve without work - spreading the virus across the breadth of the country and inflicting deep economic damage.

The latest outbreak is centered in Maharashtra, a state that contributes 14.5 per cent to the country’s overall GDP and is home to the nation’s financial hub Mumbai. Some districts of Maharashtra have gone back into lockdowns, at a time when unemployment is ticking higher.

“There is a restless urgency in the air in India to resume high growth, and incoming data point to even contact-intensive services such as personal care, recreation and hospitality gathering traction,” central bankers led by Deputy Governor Michael Debabrata Patra wrote in the Reserve Bank of India’s latest monthly bulletin. But “another outbreak, more lockdowns and restraints, will get unbearable in spite of learning from the initial experience of living with the virus.” That’s seen as a cautionary footnote to the RBI’s earlier year-on-year growth projection of 26.2 per cent for the April to June quarter.

Kaushik Das, chief India economist at Deutsche Bank AG in Mumbai, says if cases continue to surge, it will cost the economy and the impact on growth will be felt in the April to June quarter.

“Anticipating such a possible uptick in Covid-19 cases, we have already taken relatively lower real GDP growth estimate for April-June of 25.5 per cent year-on-year,” he said, compared to the RBI’s forecast.

India’s jobless rate, as calculated by think-tank Centre for Monitoring Indian Economy Pvt, inched up to 6.9 per cent in February from 6.5 per cent in January.