Surge in COVID-19 cases could pose threat to India’s economic recovery: Report

Updated : March 23, 2021 08:53 PM IST

A possible second wave could throw a spanner in India's economic recovery plans

Experts have warned of a possible financial slump given the rising number of cases in large states

Amid a sharp rise in COVID-19 cases, the Reserve Bank of India (RBI) bulletin warned that “another outbreak, more lockdowns and restraints, will get unbearable in spite of learning from the initial experience of living with the virus”.

Even as India is steadying itself after the tremendous economic fallout it faced due to the COVID-19 pandemic, a possible second wave could throw a spanner in its recovery plans, warn experts. Many fear that the rising cases and the subsequent curbs to control the spread of infection could further delay millions from getting back on their feet.

“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,” Bloomberg quoted central bankers led by Deputy Governor Michael Debabrata Patra, as having said in RBI's monthly bulletin.

Experts warn of a possible financial slump given the rising number of cases in large states such as Maharashtra and Gujarat. Priyanka Kishore, head of South and south-east Asia economics at Oxford Economics in Singapore told Bloomberg that economic momentum slowed considerably in the January to March period.

A study, published in the Reserve Bank of India’s March bulletin, also indicated a fall in the household financial savings in the second quarter (Q2) of 2020-21, wherein the savings rate fell to 10.4 percent of GDP from a relatively high 21.0 percent in the preceding quarter.

The report explained that the fall in the quarter ending September 2020 could be attributed to an increase in household borrowings from banks and non-banking financial companies (NBFCs), with household incomes taking a major hit due to the pandemic.

Touching on the impact of the pandemic, the study said that household consumption has switched from an ‘essentials only’ pattern to ‘discretionary’ spending in the quarter ending September 2020, thanks to the gradual reopening of the economy post the COVID-induced economic lockdown.

But another round of lockdown and its allied restrictions could turn the improving situation on its head and place multiple roadblocks on India's road to recovery.

Published : March 23, 2021 08:49 PM IST

Surge in COVID-19 cases could pose threat to India’s economic recovery: Report

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