Second COVID-19 wave has unleashed a devastating human cost

India’s second wave of COVID-19 has unleashed a devastating human cost with state-wide lockdowns hitting mobility steeply, says Nomura in its latest report. It believes economic impact will be most severe in May.

Nomura expects the overall hit to sequential growth in Q2 (April-June) to be much less severe than last year and less than what the drop in mobility suggests, as lockdowns are more nuanced this time and consumers and businesses have adapted. It estimates gross domestic product (GDP) to contract by 3.8% quarter-on-quarter, much less than during the first wave (-24.6% in Q2, 2020), and overall GDP growth likely at 9.8% year-on-year in 2021 and 10.8% in FY22 (year ending March 2022).

The consultancy’s economists expect restrictions to start being relaxed from June in states such as Maharashtra, and mid-June for others, but mainly in sectors that are not contact intensive. Restrictions in contact-intensive sectors may remain in place for a while longer. Lockdown restrictions and the economic hit are to be spread out over April and June, although the worst of the impact will likely be in May.

With shortage of vaccines having an overall impact on India’s COVID-19 vaccination drive, Nomura’s analysis suggests that the pace will rise sharply after June. It says the upcoming vaccine supply can fully inoculate around 10.5% of the population by end-July, 26% by end-September and potentially 52% by end-2021. This should boost domestic consumption. India has inoculated around 184 million people so far, with 10.3% of the population receiving the first dose and 3.1% fully vaccinated. The current supply capacity is unable to keep pace with the rising demand for vaccines amid the second wave.

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Furthermore, the pace of vaccination varies across states. Himachal Pradesh, Goa, Kerala, Chhattisgarh, Gujarat, Delhi and Rajasthan have the highest vaccination rates, that is 20 to 32% of the population. Himachal Pradesh and Goa are relatively low risk that is 10,000 cases/day, Kerala is high risk and others fall in the medium-risk category. Among the states with a lower proportion of the population vaccinated, Tamil Nadu raises concerns given its rising cases, as are states such as West Bengal and Andhra Pradesh that have yet to materially stabilize their pandemic curves.