The second wave of Covid-19 in India will leave behind the second wave of economic woes in the country, too.
The stringent lockdown imposed in India’s richest state Maharashtra from April 5 is estimated to chip off Rs40,000 crore ($5.4 billion) from India’s GDP during the current financial year that ends in March 2022, according to Mumbai-based CARE Ratings (pdf).
Maharashtra, which is home to financial hub Mumbai, contributes around 15% to India’s GDP. Taking into account this latest economic setback, CARE expects India’s GDP to grow at between 10.7% and 10.9% in the current financial year from its earlier projects of between 11% and 11.2%.
The western Indian state is currently reeling under a fresh wave of Covid-19 outbreak reporting over 78,000 cases on average a day. In a bid to control this surge, the Maharashtra government has decided to shut down malls, cinema halls, and salons till April 30. Only essential services such as grocery stores, medical shops, banks, and government services will be able to function in the state during the lockdown. On the weekend, a complete lockdown has been imposed, which means people are allowed to leave their houses only for emergency purposes.
“The limited five-day week model would come in the way of the growth of even the non-services sector…The impact on some sectors could be more severe on weekends, when consumption by individuals is likely to more for entertainment, hospitality, discretionary spending, among others,” CARE Ratings said.
With the consumption expected to take a beating, one of the worst-effected sectors is likely to be hospitality. “These measures to close dining out and operate only for takeaway and delivery will leave no room for their survival. It’s high time that the government acknowledges the loss and step in to bail out the industry from this collapse,” said Ankit Mehrotra, CEO and co-founder at restaurant servicing and reservation platform Dineout.
This spells bad news for the overall Indian economy, which is still recovering from the adverse impact of the last year’s Covid-19-induced lockdowns. A weakened Indian economy is expected to shrink 7.5% in the last financial year—its worst-ever performance in four decades.