Localized lockdowns will take a toll on businesses

The industry fears that localized lockdowns will take a toll on businesses as diverse as consumer goods, automobiles, real estate and e-commerce, and even hit fresh hiring by corporate offices. It will have a knock-on effect and disrupt networks nationwide.

However, the government has maintained that a national lockdown is not on the cards. A senior government official, according to The Indian Express, said the surge in COVID-19 cases is a matter of concern, and it will be fought with vaccines. “This year, we aren’t going to work on lockdowns. It is a matter of worry but we will fight it out with vaccines. The pandemic should be handled far better.”

Experts say that unlike last year, there is hope that both the authorities and India Inc have gained experience and are better prepared to deal with the fallout of the pandemic. They, according to ET, said that while night-time lockdowns have not yet disrupted supply chains for manufacturing companies, these have taken a toll on consumer sentiment.

The surge in COVID-19 cases comes at a time when optimism had returned on the possibility of a service sector rebound. Buoyed by a sharp increase in new orders, the services PMI recorded the fastest pace of expansion in a year, rising to 55.3 in February 2021.

Moreover, the rollout of the COVID-19 vaccines generated optimism over future growth prospects and business confidence improved. Barclays India, in its recent report, highlighted that if the current restrictions remain in place for two months, this could shave 0.17% points from the nominal GDP growth. “The growth rate in active cases is likely to be sounding alarm bells. The current seven-day moving above average of active case growth is around 6.2%, the highest since early May 2020, when India was at the beginning of its long first wave.”

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It believes that the economic fallout from the new lockdown will be small. “We estimate that a week of the current restrictions might cost the economy $0.28 billion, hence over a period of two months, the loss of activity could amount to around $2.5 billion.”