India’s second Covid wave of the pandemic is a humanitarian rather than an economic crisis, according to Japanese brokerage, Nomura.

It is not an economic crisis. The report says the hit to mobility due to the rolling state-wide lockdowns has been steep, and the economic impact is likely to be most severe in May.

However, we expect 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, a view supported by international evidence.

Highlighting that the improving global growth will act as a tailwind, the brokerage said it expects the current lockdowns to last six more weeks.

The brokerage said vaccinations are “trailing” at present, but the pace of inoculation will pick up after June as its analysis indicates increased supply.

“We expect half of the population to be fully vaccinated by end-2021 and India to reach its vaccine pivot point in Q3 (September quarter), which should boost domestic consumption,” it added.

Maintaining its 10.8 percent GDP growth estimate for 2021-22, Nomura said the full impact of easy financial conditions should become visible as the pandemic's uncertainty ebbs and vaccinations rise.  “We expect a reverse repo rate hike in October and maintain our call for 0.50 percent of repo rate hikes in H12022,” it said.

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