COVID 2nd wave forces UBS to lower India's GDP forecast; FY22 real GDP seen at 10%

Jain added, “Since February 24th we started seeing mobility restrictions getting announced, if you look at the activity indicators that we monitor closely, for instance, Google foot traffic monitor - for retail and recreation it is almost down 20 percent from the baseline. Economic activity gets impacted when we stop mobility or increases mobility restrictions.”

“At the same time, the ultra-high frequency indicators that we are tracking whether it is a UBS India financial conditions Index and even the electricity demand, e-way bill for truck movement, CMIE unemployment levels for - the last couple of weeks we are seeing that most of the indicators are showing a very mixed performance. So while power demand continues to remain buoyant most of the other indicators continue to remain subdued.”

For the FY22 growth outlook, she said, “We were at 11.5 percent prior to the second wave for our real GDP growth forecast. We are now seeing a downgrade by 150 basis points to 10 percent for FY22. The base case assumption is that the current mobility restrictions which are in place as of today almost 16 states have announced some kind of mobility restrictions whether it is a weekend lockdown, night curfew, or a state of Maharashtra where the curbs are much more strict versus other states.”

“Our sense is that if the restrictions remain in place still May and economic activity normalise by June, however, if the COVID situation continues to remain uncertain and last longer and we are already seeing that the health infrastructure is getting constraint there is a downside that India’s real GDP growth could actually slow down by a much larger magnitude of 3-5 percent in FY22.”