Covid lockdowns to cost India $1.25 bn a week: Barclays

If the current restrictions remain in place until the end of May, we estimate that the cumulative loss of activity could amount to around $10.5 billion, or around 0.34 percentage point (pp) of annual nominal gross domestic product, say Barclays economists.

The sporadic lockdowns / mobility curbs and night curfews put in place across key economic hubs in India in the past few days are likely to cost the nation $1.25 billion per week, says the latest report dated April 12 from Barclays. This increase, Barclays said, reflects modest tightening of activity curbs, and the widening geographical spread of the second Covid wave.

“Taking into account rolling Covid curbs, if the current restrictions remain in place until the end of May, we estimate that the cumulative loss of activity could amount to around $10.5 billion, or around 0.34 percentage point (pp) of annual nominal gross domestic product (GDP). However, the impact on the Q1-FY22 nominal GDP is likely to be higher, shaving around 1.4 pp from Q1-FY22 nominal GDP,” wrote Rahul Bajoria, chief India economist at Barclays in the report coauthored with Shreya Sodhani.

In March 2021, Barclays had estimated that mobility restrictions in place for two months could cost the economy $5.2 billion in lost output, or 0.17 pp of nominal GDP. That said, they have maintained fiscal 2021-22 (FY22) real GDP growth forecast at 11 per cent y-o-y – at least for now, cautioning against the downside risk if the curbs are tightened further or are imposed across economic hubs in the country.

According to official data, India recorded a surge of 168,912 Covid-19 cases in the last 24 hours. At the current run rate, it has emerged as the second-worst hit nation with 13,527,717 cases in total and the 4th-worst hit country in terms of active cases.

Against this backdrop, a number of state governments — including that of Maharashtra and Delhi — have announced mobility curbs. Barclays believes that the number of new active cases is likely to stabilise in May, as recoveries catch up with new cases. That apart, vaccination should also pick up pace. However, India’s ability to continue the current run rate may be at risk, given incremental news flow of supply shortages and vaccine bottlenecks, they said.

Almost 60 per cent of India’s economy is now subject to some mobility restrictions, Barclays believes, with key economic hubs such as Maharashtra, Gujarat, Tamil Nadu and Rajasthan seeing rising Covid-19 cases and falling mobility.

As regards Maharashtra, the mobility curbs put in place in the wake of rising Covid cases would lead to a dip in gross value added (GVA) growth by 0.32 per cent at the overall domestic economy level in fiscal 2021-22 (FY22), CARE Ratings had recently estimated.

“Against these new guidelines our projections are that around Rs 40,000 crore of GVA will be impacted based on a single month of lockdown. Any extension of the same will result in further loss of output from the state,” it said.

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