COVID third wave impact on Indian Economy


Covid third wave impact on economy expected to be much softer than that of the lockdown last year because vaccination numbers are rising and the states and the Centre have learnt to contain lockdowns better

Nandini Chauhan

The second wave has come and gone. A third wave may be getting ready, but let’s hope it’s milder and for now, enjoy the relative calm visible in the economic data. It’s also a period when the post-lockdown bounce — due to pent-up demand finding outlets — may be at risk of petering out. Will underlying demand be strong enough to keep the economic indicators flashing green is a question for which answers should come up in the coming months.

The Nomura India Business Resumption index dropped after reaching a record high in the preceding week. Underlying high frequency data points are showing mixed trends. Our Economic Recovery Tracker too has been pointing to volatile trends, do read the latest update to the tracker published today. The latest edition points to a moderation in electricity usage and retail vehicle sales. On the brighter side, unemployment moderated a bit even as people are stepping out more to buy essentials.

Elsewhere in the world, an increase in COVID-19 cases is delaying office reopening dates and also clouding the recovery that was taking place in business travel. Singapore is asking its residents to limit social gatherings. Saudi Arabia has cut crude oil sale price for its Asia customers, reflecting demand uncertainty. But the oil price cut by Saudi Arabia may well be aimed at market share gains, we write in today’s edition. A slowdown in China’s economy and diversification of oil sources by India may be behind this move.

Investors will be keeping a close watch over whether the positive momentum seen in domestic demand can be sustained. One way of doing it is to do everything possible to push back against a harsh third wave. For this, the Centre and states should come together to adopt an agenda of imposing COVID-19 appropriate behaviour through their ground level workers, argues Subir Roy in this piece. Concurrently, the governments can give a sustained push to vaccination. This can not only reduce the risk and severity of the third wave but also help the economy maintain its recovery. The fact that we have crossed the 1-crore mark in vaccinations for the third time in 11 days is great news. Now we just need to make that a daily affair.


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