4th Wave Of Covid-19 Unlikely To Impact Economic Growth Of India In Near-Term : Report

4th Wave In India: Nomura said in a report that the rising cases of the Covid-19 in India may be an 'early sign' of the 4th wave. However, its impact might only be visible in the medium term.

New Delhi: Japanese brokerage Nomura on Friday stated that the rising cases of the Covid-19 in India are “early hints” of a fourth wave of the pandemic. However, they do not pose any near-term risk to India’s economic growth. However, from a medium-term perspective, there are headwinds for growth like high inflation, weak private CAPEX and slower global growth.

The report also stated, “Near-term growth should be supported by continued normalisation as services catch up and due to lagged effects of easy monetary policy and government capex. However, high inflation, weak private capex and slower global growth are medium-term negatives.”

Lower GDP Growth Forecast

The brokerage had recently lowered India’s real GDP growth forecast to 7.4 per cent in FY23, down from the 8.4 per cent it expects the economy to clock in FY22. COVID-19 cases are starting to pick up, with the 7-day moving average of daily cases up to 2,800 per day as of April 29 from less than 1,000 in mid-April, it said, adding that these are “early hints of a fourth wave”.

It added, “It is too early to view this as a significant downside risk for growth, because economies are learning to live with the virus; newer variants are infectious but not as deadly; and there is reduced public and policy appetite for a return of serious restrictions.”

Economic Sensitivity Should Wane In Future

The potential fourth wave is a risk to monitor, it said, adding that the economic sensitivity to future waves should also wane. The brokerage’s activity normalisation index shows a broad-based improvement in activity in March, and when one excludes services which are rising fast after the third wave, all other key sectors have surpassed their pre-pandemic levels.

Aggregate demand and aggregate supply now stand at 15 percentage points and 9 percentage points above pre-pandemic levels. Consumption is 3 percentage points higher, investment is percentage points higher and industry is 4.5 percentage points higher. But the services sector – the worst hit from the restrictions so far – remains around 10 percentage points below pre-pandemic levels, the brokerage said.

(With PTI inputs)