Fresh Covid wave dents prospect of recovery, retail mobility

The fresh lockdowns and restrictions in the country in the wake of second Covid-19 wave is beginning to have its impact on the economic activity again putting doubts over a recovery that was expected to be swifter in coming months.

Two key indicators of the economic activity - retail mobility and traffic congestion - particularly for Maharashtra, is beginning to evaporate putting a question mark on how country's economic capital will cope with the fresh disruptions caused by the pandemic, which is spreading faster than the first and in more states.

As per a research report by Crisil, all-India level retail mobility is starting to stutter now. It grew by a marginal 0.7 percentage points (pp) in the last week, driven by the restrictions on movement introduced in Maharashtra, Punjab, Gujarat and Madhya Pradesh. Maharashtra saw the highest fall in retail mobility among these states, by 5.2 pp.

Apart from mobility indicators, traffic congestion is also used as a proxy for tracking economic activity. The traffic congestion index for major cities in some of the hardest-hit states - Mumbai (Maharashtra), Bengaluru (Karnataka), and Ahmedabad (Gujarat) - has nosedived in the past few weeks, and is winding back towards levels seen during the nationwide lockdown last April, Crisil said.

The current surge in the pandemic has the potential to derail economic growth which the government is targeting this year to come out from big shrinkage in the GDP last fiscal. Projections are that GDP may grow in double digit in FY22. But if the pandemic continues affect the economy in waves, experts said that achieving a full scale recovery in FY22 will be difficult.