Re‐assessing the 2nd COVID wave - Yes Securities
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With the second wave induced lockdowns and restrictions spanning 15‐30 days in various states, it is imperative to reassess the economic impact of the curtailed demand and supply side of the equation. We have downgraded our earlier estimates on FY22 GDP projection given that the pandemic lockdowns and restrictions have permeated across the length and breadth of the country, having a much higher magnitude than we initially assessed.
We now see India FY22 real GDP growth at 9.1‐9.3%, when compared with our initial estimate of 10.3‐10.5%. For instance, we projected in April that stringent measures will be only confined to 7‐8 states. Our initial GDP estimate was built on the assumption of a lockdown spanning 30‐45 days. Although stringent measures in many states will likely ease by the end of May, we assess now that around 12 states may extend the stringent measures at least till mid‐June, entailing some degree of economic impact on around 33% of India’s GDP.
Glancing through the prism of high frequency indicators, a deceleration in the aggregate demand is quite palpable during the month of April, with subdued economic conditions extending in May as well. As a case in point, our estimates suggest that GST collections can fall to 1.05‐1.15 trillion in May and 0.8‐0.95 trillion in June. However, we see moderate economic recovery during June, as states which will relax stringency measures, will likely retain 90‐95% of its potential economic output from our assumption of 75‐80% in April and May.
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