Third wave drags business resumption back to pre-pandemic levels; growth focus a must

The logo of Nomura Securities is pictured at the company's Otemachi Head Office in Tokyo, Japan, November 18, 2016. Picture taken November 18, 2016. REUTERS/Toru Hanai - RTSTQUW

The third COVID wave seems to have dragged business resumption back to the pre-pandemic levels.

A surge in contagion during the third wave weighed on the pace of normalisation of economic activity in India and drove it sharply down for the third consecutive week.

Nomura India Business Resumption Index (NBRI) fell to 100.50 for the week ended January 23 versus 102.20 in a week back, illustrating the impact of the surge in cases of COVID-19 driven by the Omicron variant of the virus. It is now only 0.50 percentage points above its pre-pandemic levels.

“Mobility continues to plummet. Google workplace and retail and recreation mobility fell by 10.7pp and 4.4pp, respectively, from the previous week, while the Apple driving index inched 1.7pp higher after a massive 84pp fall over the past two weeks. The labour participation rate inched up to 39.8 percent, while power demand rose by 4.9 percent week-on-week (sa) as payback after three consecutive weeks of contraction,” said Nomura Research in a note to its investors.

Many states imposed night curfews last week amid the continued spread of infections. On January 25, India reported more than 3.06 lakh COVID-19 cases, pushing the active caseload to over 22.49 lakh. Even though cases reporting over 3 lakh from the last few days, the rate of increase has moderated. A few states, including West Bengal and Delhi, have reported lower cases than last week, and death rates remain stable.

The Nomura study indicates missed economic data. Air traffic continued to fall steeply by 36 percent from its December peak, but railway passenger revenues have stabilised and freight revenues remained robust. The analyst firm expects as COVID cases stabilise, economic activities would improve around February or March.

Nomura recently lowered India's GDP growth forecast to 8.7 percent for FY22 from 9.2 percent estimated earlier and it expects that the upcoming Budget will prioritise growth, with directional fiscal consolidation to 6.4 percent of the GDP in FY23 from 6.8 percent of the GDP expected in FY22.