V-shaped recovery in India in Q1 FY22 unlikely: Swiss brokerage

18 Jun '21

2 min read

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Lockdowns imposed by various Indian states in April and May to contain the second wave of the COVID-19 pandemic has likely led the economy to contract by 12 per cent in the June quarter compared to a 23.9 per cent contraction in the same quarter last year, according to a report by Swiss brokerage UBS Securities India. Hence, India will miss a sharp V-shaped recovery this time.

The economy had its worst contraction on record in fiscal 2020-21 at 7.3 per cent as the 2.5 months of unplanned lockdown announced by the government with just a four-hour notice had crippled the economy in the first quarter with a massive 23.9 per cent contraction, which improved to minus 17.5 per cent in the second quarter.

But the economy showed a sharp V-shaped recovery from the second half when it posted a 40 bps positive growth and in the fourth quarter clipping at 1.6 per cent, containing the overall contraction at 7.3 per cent for the year.

This 12 percentage point contraction will have the economy missing a sharp V-shaped recovery this time around, unlike seen last year after the national lockdown was lifted, as consumer sentiment remains very weak this time around as people are more worried about the pandemic than last year, said the brokerage.

UBS-India activity indicator suggests that economic activity has contracted by an average of 12 per cent in the June 2021 quarter against 23.9 per cent in the June 2020 quarter, a news agency reported.

Though the brokerage expects a sequential pick-up in economic activity from June, it believes that the economy may gain traction only from the second half.

Fibre2Fashion News Desk (DS)

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