COVID Surge = Economic Purge?

 BY CHINMAY NARANG 

On the 1^st Anniversary of first ever pandemic related lockdown, India senses a potential halt in the ongoing economic recovery of the Nation. Various Macro indicators remained green in the past 2-3 months implying initial steps in the direction of recovery of the much damaged Indian Economy. Things took a sharp turn when Covid-19 cases saw a surge in late March and early April and a new Double Variant of SARS-CoV-2 surfaced in many parts of India. Many states and UTs responded to this second wave of the Covid-19 by re-imposing night curfews and weekend lockdowns. The restrictions have again impacted small businesses and the local economy for the worse.

Goldman Sachs downgraded its projection for India’s growth forecast after the surge in cases. The investment bank has lowered the figure from 34% year-on-year to 31.3% for the second quarter of 2021. The Indian Rupee showed a 1.1% decrease to 74.2201 USD following the spike in cases. The RBI, however, believes the second wave will not have a substantial impact on the economic conditions of the nation owing to a co-ordinated fiscal and monetary response. The MPC decided to keep the repo rates and reverse repo rates unchanged in response to the Covid Situation.

Various Indicators show an early sign of economic distress. Exports witnessed a fall of 0.8%, after seeing an upward rebound of 6% previously. Not to mention a possible positive for inflationary pressure owing to the rise in fuel prices which in turn increases the transportation costs coupled with potential rise in costs due to supply chain disruptions because of the second wave. Also, after easing in January, CPI inflation rose again in February, flashing red. All in all, a second wave of Covid seems more like a tsunami wave on our helpless island like economy.

Surely the inaction on changing Government’s same old response to the spike in cases would not hurt us at the moment. But inaction in curbing covid-19 cases will take a heavy toll on the economy.

The tale so far this year bears a strange resemblance to last year. When various restrictions were imposed and partial lockdown took place, it was only around this time last year. An unknown virus with an unknown impact was on the loose in 2020 and so is a new Double Variant in 2021. The World saw the economic impact of the virus last year. A disturbing question arises, is 2021 next in turn?