Economy headed into rough patch as consumer sentiment down in dumps due to 2nd wave of covid-19: ICRA
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Rating agency ICRA in its latest report has said that uptick in headline numbers of key economic indicators in April is due to the base effect and that the economy is headed into rough patch as consumer sentiment is down in the dumps due to the second wave of the pandemic. Despite the base effect-led spike in growth of many sectoral indicators in April, the slackening momentum, driven by the second wave of the pandemic has emerged as a major concern.
Moreover, the agency said the bruised consumer sentiment and the high healthcare and fuel bills will limit discretionary purchases in the immediate term, in addition to the expected cut-back in spending on contact-intensive services, leading to a negative overall impact on the economy. It noted that as expected, the shrunken base of the nationwide lockdown in April 2020 has boosted the pace of year-on-year expansion of several high-frequency indicators in April 2021, resulting in a widespread improvement compared to the performance in March 2021.
However, the report said the optimism generated by this trend is limited, as eight of the 13 non-financial indicators in April remained below their pre-COVID-19, i.e. at April 2019 levels. It pointed out that indicators such as GST e-way bills, electricity generation, vehicle registrations and rail freight traffic have slowed down and lost the sequential momentum in April, reflecting the rise in the pandemic infections cases and localised lockdowns
