India’s economy will likely contract this quarter as Covid cases soar - economists

CNBC reports that according to two economists, India’s economy may shrink in the current quarter as Covid-19 cases surge, but the country could recover in the next one.

On Tuesday, India reported another 323,144 cases, bringing the country’s cumulative infections to more than 17.6 million. That comes after the country reported five straight days of record new daily cases.

Sonal Varma, India chief economist at Nomura, said the country is “clearly going to see a sequential growth hit” in its first quarter. India’s fiscal year begins in April and ends in March the following year.

She predicts that gross domestic product will shrink around 1.5% in the current quarter, which ends in June. Varma added there is “downside risk” to this estimate.

Compared with the fiscal first quarter of 2020, however, the economy could grow more than 25%, she said. That’s because India’s GDP contracted nearly 24% in the same period last year.

Radhika Rao, an economist at DBS, similarly expects a contraction from last quarter, but “quite buoyant” numbers compared with last year.

She said there are “significant base effects,” and there will be a “natural bump up anywhere between 20% to 23%” in the quarter ending in June.