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Economic Normalcy in India by Aug-sept, Predicts CLSA

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The second wave of the Covid-19 pandemic is expected to peak in India by June. The economy will likely normalize by August-September in India as per foreign brokerage CLSA. CLSA said India’s second wave would peak by June 2021, though some states may take more time.

India may see a peak in the 7DMA of new cases by June. This peak in Maharashtra may have already happened, while Haryana, Delhi and Andhra Pradesh are next in line, CLSA said.

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Using the mid-date of the predicted range, 11 of these 16 states may see a peak of this wave by the end of June. These make up 47 per cent of India’s population and 65 percent of GDP.

Compared to cumulative testing equal to 22 per cent of the national population, Madhya Pradesh (10 per cent), West Bengal (11 per cent), Rajasthan (12 per cent) and Uttar Pradesh (19 per cent) have tested much lower proportions of their respective populations, the brokerage said.

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“This may suggest a higher chance in under-reporting of cases in these states and may also impact the accuracy of predictions regarding the peak. West Bengal, Madhya Pradesh, Telangana, Uttar Pradesh and Bihar may be the last to peak, i.e., after July,” CLSA said.

Of these 16 states, 13 have imposed similar lockdown-like restrictions which restrict the free non-essential movement of people. Barring essential services, offices are either closed or allowed to open with clear restrictions.

A few states have also put a cap on the daily timing of grocery stores for 4-6 hours. These states contribute nearly 75-77 per cent to India’s GDP/population.

Mobility restrictions are a bit less strict, and more in the form of night curfews in the remaining three states of Gujarat, Andhra Pradesh and Punjab, but even these have clear restrictions on offices, shops and social gatherings.

Restaurants are closed in all these states while only takeaway and home delivery is allowed. India’s mobility for May YTD to workplaces/recreation/groceries is at 52 per cent/ 39 per cent/ 77 per cent of pre-Covid-19 levels, respectively, which compares to the lows of 38 per cent/ 18 per cent/ 48 per cent seen during the strict nationwide lockdown in April 2020.

These saw a high of 85 per cent/ 77 per cent/ 116 per cent of pre-Covid-19 levels in February 2021. Data for four key cities show traffic at sub-20-25 per cent of the 2019 average.

Delhi, Karnataka, Uttar Pradesh and Madhya Pradesh appear to have the biggest impact on mobility in May MTD. Andhra Pradesh, West Bengal, Tamil Nadu and Telangana are states where mobility has had less of an impact in May so far.

Using these estimates, CLSA expects restrictions will begin to be rolled-back in Maharashtra in early-June. Possibly, states with over 75 per cent of India’s GDP should roll-back these restrictions by July-Auust, i.e., 4-6 weeks after the peak in the respective states. This points to some kind of normalcy in economic activity from August-September 2021.

Therefore, these restrictions could have a notable impact on earnings in 1QFY22 as well as part of 2QFY22. However, with a possible peak in Covid-19 cases in the coming weeks, announcements on the rolling-back of restrictions and a further pick-up in vaccination should lend enough hope for the markets to look beyond this short-term impact and focus on a possible growth pick-up after the impact of the ongoing wave is over, the CLSA said.

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