India' second wave has extracted large human cost than economic crisis, says Nomura

New Delhi: Japanese brokerage, Nomura claims Indias second Covid wave is a humanitarian rather than an economic crisis.

"India's second wave has likely peaked, but in its wake, it has unleashed a devastating human cost. A more virulent virus strain and stretched hospital capacity have resulted in a sharp rise in fatalities," the report said.

However, the report warns severe economic impacts in May due to state-wide lockdowns in the country

" However, we expect the overall hit to sequential growth in Q2 (April-June) to be much less severe than last year and less than what the drop in mobility suggests, as lockdowns are more nuanced this time and consumers and businesses have adapted, a view supported by international evidence" report added.

Also, with accelerating pace of vaccinations post June, India should experience sequential economic growth.

"We expect half of the population to be fully vaccinated by end-2021 and India to reach its vaccine pivot point in Q3, which should boost domestic consumption," the report said.

Overall, the reports expects the second wave impact to be localized in Q2 (April-June), with GDP contracting by -3.8% q-o-q, much less than during the first wave (-24.6% in Q2 2020), and overall GDP growth likely at 9.8% y-o-y in 2021 and 10.8% in FY22 (year-ending March 2022).

Nomura also believes that core inflation to remain elevated at 5.3% y-o-y in 2021, topping the already-elevated 5.1% in 2020.

Faster vaccinations after June, strong global growth and easy financial conditions are likely tailwinds to the ongoing business cycle recovery, said report.

(With IANS inputs)