Covid-19 second wave: India Inc. optimistic, but spike in cases big concern

India is in the midst of a second wave of Covid-19 pandemic, but that has not dampened the spirits of India Inc., a Mckinsey survey suggests. In every region except Latin America, a majority of the respondents expect improvements in their countries' economies, the global consultancy's Covid-19 briefing note, published on March 31, says.

Interestingly, 86 percent of the business leaders who responded to the Mckinsey survey in India said the country's economy is going to do better in the next six months. The US was the other country where optimism was high. The briefing note said that its latest survey "finds greater optimism about the economy and corporate prospects than at any time since the crisis began". "Still, weak demand continues to threaten corporate growth, and the pandemic remains the biggest risk to growth in respondents' countries," it said.

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In Rabo Bank's latest economic report, Wouter van Eijkelenburg, Rabo Research Global Economics & Markets shared Mckinsey's caution as it said India's economic growth "expectations may need to be tempered as a second wave of Covid cases is on the rise and could hamper growth in the next months".

The Rabo Bank report said one of the possible reasons for the new surge in case load could be the optimism surrounding the availability of vaccines, causing people to lower their guard with regard to the spread of the virus.  It is also reflected in the sudden rise in mobility from mid-January, the report notes.

"It will be interesting to follow this development in the coming weeks, as the steepness of the curve should sound the alarm for people to limit their movements to prevent the virus from spreading. If not, new restrictions could be imposed to contain the spread. Whether restrictions are voluntary or mandatory, they will hamper economic growth in March and April," the report had pointed out. It also expects the Reserve Bank of India's Monetary Policy Committee (which is meeting during April 5-7)  to maintain its policy rate.

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The Oxford Economics, an entity engaged in global forecasting and quantitative analysis has in its latest blog 'Coronavirus Watch: Grounds for cautious optimism' noted that the rise of India's Covid case numbers is casting doubt on hopes that the population may have achieved some form of natural herd immunity. "The sharp resurgence in global Covid-19 cases shows that there are still obstacles to be navigated on the path to normality and that clear downside risks to activity will persist in the near term," it said.

Goldman Sachs in its India 2021 Outlook report in November 2020 had predicted Covid-19 vaccines to extend India's economic rebound in 2021-22 (FY22). "We expect that the broad-based availability of an effective vaccine in India could allow containment policies and mobility to normalise by mid-2022. This should allow a meaningful activity rebound in 2021 - particularly in consumer-facing services sectors, where activity remains significantly below pre-COVID levels,"  Goldman Sachs analysts Jonathan Sequeira and Andrew Tilton had noted in their report.

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In fact vaccination remains the key in the March 25th special research report of the State Bank of India (SBI) too. Titled "Second wave of infections: The beginning of the end?", the report says that another lockdown to contain Covid-19 infection is not going to be effective and mass vaccination is the only hope. The entire duration of second wave may last approximately up to 100 days counted from February 15 (till May end), the report says. Perhaps, the expectation of time bound control of infections is what is leading to the optimism that Indian economy may not be as worse as it was during the initial phase of Covid-19 wave last year.

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