Next few months to be critical for India due to renewed Covid-19 surge: Oxford Economics

According to official data, the Indian economy contracted 8% in 2020-21

The next few months will be critical for India as the renewed Covid-19 surge challenges the country's immature economic recovery, global forecasting firm Oxford Economics said on Friday.

It also said that while the impact so far appears milder and the economy more resilient, Indian policymakers have no room for complacency.

It further said that with state governments reluctant to reintroduce strict lockdowns, the economic impact will be much less severe than in the second quarter of last year.

"The next few months will be critical, as the renewed Covid-19 surge challenges India's immature recovery.

Read | These 10 states show steep rise in daily Covid-19 cases

"While the impact so far appears milder and the economy more resilient, policymakers have no room for complacency," Oxford Economics said.

It said that based on the international experience, the vaccination rate in India is far below the level required to contain the virus by itself.

"The second wave likely has some way to go both in height and breadth.

"If the health situation worsens substantially and tighter restrictions are reimposed widely, this would threaten our baseline forecast for the first half of 2021," Oxford Economics said.

It said mobility levels are likely to come under more pressure in the coming days as the second wave looks set to widen. The global forecasting firm, however, said it does not expect to see a massive decline like in 2020, as targeted lockdowns remain the preferred containment strategy.

"Still, we expect the economic impact will not be as dramatic as in 2020," Oxford Economics said adding that it is true that countries that avoided lockdowns to control the virus last year have not fared especially better economically than those that did.

India registered a record single-day spike of 1,31,968 new Covid-19 cases on Friday, pushing its infection tally to 1,30,60,542, while the death toll increased to 1,67,642 with 780 more fatalities in a day, the highest since October 18, the Union health ministry data showed.

Registering a steady increase for the 30th day in a row, the number of active Covid-19 cases increased to 9,79,608, which is 7.5 per cent of the total infections, according to the data updated at 8 am.

According to official data, the Indian economy contracted 8 per cent in 2020-21 while the Economic Survey 2020-21 sees 11 per cent growth in 2021-22.

The International Monetary Fund (IMF) on Tuesday projected an impressive 12.5 per cent growth rate for India in 2021, stronger than that of China, which was the only major economy to have a positive growth rate last year during the Covid-19 pandemic.