Covid impact on economy: 3rd Covid wave starting to bite; services sector likely to suffer most: Nomura

The foreign firm said its business resumption index for the country registered a sharp decline -109.9 for the week ended January 9 as against 119.8 in the week before.

According to the analysis based on its index, Nomura said workplace mobility and the labour participation rate declined 0.7 percentage points and 0.6 basis points, respectively for the week ended January 9.

The unemployment rate rose by 0.7 percentage points to 7.3 per cent, the foreign firm said, adding that power demand registered a tepid rise of 0.2 per cent week-on-week after a 3.1 per cent fall the prior week.

“The third wave is rapidly spreading, with daily new cases rising to nearly 180,000, although death rates remain low. Voluntary pullbacks and state restrictions (night curfews and on contact intensive services) are starting to bite, as evidenced by the fall in mobility and airline traffic. Studies suggest the third wave should peak by month-end, limiting the economic impact to Q1 2022,” Nomura wrote.

With the recently-discovered Omicron strain of the coronavirus spreading rapidly in India, fresh daily infections have risen exponentially, with the country reporting more than 1.79 lakh new infections over the last 24 hours.

According to the firm, while the adverse impact on economic growth stemming from the third wave is expected to be lesser than previous waves, the services sector is still likely to bear the brunt.

Nomura recently lowered its forecast for India’s GDP growth to 3.2 per cent year-on-year in Jan-March 2022 from 5.2 per cent earlier. The prediction for GDP growth in the current calendar year as a whole stands at 7.4 per cent, lower than the 8.5 per cent that Nomura had forecast earlier while that for the current financial year has been pegged at 8.7 per cent, lower than 9.2 per cent earlier.

According to data released by the National Statistics Office on Friday, India’s economy is expected to grow at 9.2 per cent in the current financial year.

The first Advance Estimates show that nominal GDP may rise to Rs 232 lakh crores in the current financial year from Rs 203.5 lakh crores in 2019-20 (Apr-Mar).

Nominal GDP slid to Rs 197.5 lakh crores in the previous financial year as economic activity suffered because of the nationwide lockdown imposed to stem the spread of the coronavirus.