Business activity In India has fallen by a fourth of the pre-Covid levels due to lockdowns imposed by states to contain the spread of the second wave of Covid-19, Japanese brokerage Nomura said in a report released to PTI.
However, despite the activity slump, Nomura maintained its growth estimates for the year, saying the lockdowns present “downside risks”, PTI reported.
As of April 25, the Nomura India Business Resumption Index (NIBRI) registered its steepest weekly fall in over a year of 8.5 percentage points to 75.9, which is 24 percentage points below pre-pandemic normal, the brokerage said in a statement.
“There are reasons to expect a muted economic impact. The experience from other countries suggests a lower correlation between falling mobility and growth. Parts of the economy like manufacturing, agriculture, or work-from-home and online based services should be resilient,” the brokerage said, maintaining its 11.5 per cent growth forecast for 2021.
The brokerage said as the pace of vaccination picks up, which it expects from June, there should be another return of pent-up demand, in addition to other tailwinds like strong global growth, lagged impact of easy financial conditions, and front-loaded fiscal spending.
The ongoing second wave should remain a short-term negative economic shock which is likely to be localised to the June quarter and the medium-term growth outlook remains stable, it said.
The sharp slowdown in ultra-high frequency indicators since April and extended restrictions does suggest downside risk to its GDP growth projection of 11.5 per cent in 2021 as against a contraction of 6.9 per cent experienced in 2020.