A month-long national coronavirus lockdown can dent GDP by 2%: Report

India’s economic recovery is still “shallow” and a month’s national lockdown to curb the rising pace of Covid-19 infections can dent the GDP by up to 2%, an American brokerage warned on Tuesday


Coronavirus | Indian Economy | India GDP

India’s economic recovery is still “shallow” and a month’s national lockdown to curb the rising pace of COVID-19 infections can dent the GDP by up to 2 per cent, an American brokerage warned on Tuesday.

Analysts at BofA Securities said there has been a six-times increase in the number of infections to over 1.03 lakh, and state governments have responded with localised lockdowns till now.

A national lockdown, which it reckoned as a “last resort”, if declared, can have deep impact on the growth process, which is still “shallow”, it said.

“We grow even more concerned that rising Covid-19 cases pose a risk to our still shallow recovery…We estimate that a month of national lockdown costs 100-200 bps of annual GDP. Needless to say, this also aggravates fiscal risks,” it said.

The country was kept under a lockdown to arrest the spread of COVID-19 infections last fiscal, which is going to be the primary reason for an over 7 per cent contraction in GDP. Analysts are expecting a double-digit GDP growth in FY22 on the base effect.

The brokerage said the infections have crossed the peak and warned that the pace of rise in cases is picking up.

In 2020, it took three months for cases to rise from 10,000 levels in mid-June to 90,000 levels in mid-September, whereas in this round, it has taken only six weeks.

Overall testing continues to be far from adequate, it said, making it clear that the infections have not risen due to a jump in testing per se.

The death rates are mercifully lower, it said, explaining that the 478 fatalities recorded on Monday were 42 per cent lower than what was observed when the daily cases were at the peak of 97,000.

“Given the high economic cost, we expect the Center and State governments to try to contain the spread with the tightening of Covid-19 regulations, night curfews and localized lockdowns,” it said.

“It remains to be seen if this second wave of Covid 19 cases subsides without a national level lockdown,” it added.

In its base case, the brokerage continues to see a 9 per cent jump in the real gross value added growth for FY22, but there can be a 3 percentage point impact to the estimate in case of a national lockdown, it warned.

(Only the headline and picture of this report may have been reworked by the Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)

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