USD 1.25 billion impact on economy due to the possible restrictions imposed by second wave of COVID-19

USD 1.25 billion impact on economy due to the possible restrictions imposed by second wave of COVID-19

 
USD 1.25 billion impact on economy due to the possible restrictions imposed by second wave of COVID-19

The far more deadlier second COVID-19 wave has once again forced many states to implement restrictions on regular activities, including weekend lockdown as well as night curfews. This also includes restricting normal operations of many services such as entertainment parks, theatres and schools among others. This restriction on mobility and  businesses as per reports, can cost the economy to the tune of USD 1.25 billion each week. According to a report, if the conditions do not improve, it can further damage the Indian economy by around USD 10.5 billion, British brokerage Barclays said.

Last month, the estimate was that, if mobility restrictions continued for two months it could cost the economy USD 5.2 billion in lost output, or 17 bps of nominal GDP.

Now, if the current restrictions remain in place for two more months, the nominal GDP will reduce by 34 bps and real GDP by around 20 bps -- this is almost twice the impact calculated previously, as per Barclays.

The highly infected states of Maharashtra, Gujarat, Tamil Nadu, Rajasthan, etc will impact the economy by around 60%. The cases are still rising and the gradual approach to a complete lockdown is fairly visible. While elections were due, the Prime Minister had said that lockdown is not a solution (solutions change)... and now that the BJP interest key states are done with their election process, the lockdown seems a valid approach.

Maharashtra and Rajasthan will be the states that will take the first step in implementing phased lockdown - this is apparent. MObility and economy restrictions in Maharashtra will bring down the gross value added growth by 0.32 basis points. Maharashtra contributes over 16 per cent to the national GDP. This was disclosed by a recent CARE report.

The new mobility curbs will lead to around Rs 40,000 crore of Gross Value Added loss in a month and any extension will result in higher output loss, it added.

Source: Economic Times

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