Just as the nightmare that was fiscal 2020-21 was growing distant in the rear view mirror and the nationwide depression over the coronavirus was slowly fading as infections and fatalities dropped, and better days were being seen with the nationwide vaccination drive gaining pace, the second wave of Covid-19 has come roaring back with a vengeance. This wave seems to be more infectious and dangerous than the first wave, and once again regional lockdowns are being imposed and businesses are turning jittery. Niti Aayog Vice-Chairman Rajiv Anand has warned that this wave could spark greater uncertainty and the country in general, and trade and industry in particular, will have to prepare for a long haul.

An IIT analysis of the seven-day average of cases shows the current wave is nowhere near its peak. The weekly moving average of daily new cases has increased 14 times since February 11, when it started rising again after declining for five months. The first wave rose for 29 weeks (or 33 if the first case reported on January 30 is taken as the starting point) before it peaked. Experts point out that the second wave is far steeper in nature than the first wave.

The curve of Covid-19 cases and mobility trends will have a direct bearing on the level of economic activity. India’s GDP went down by 24.4 per cent in the quarter ended June 2020. According to the second advance estimates, fiscal 2021-22 is expected to suffer a GDP contraction of around 8 per cent. The fiscal 2021 Union budget has projected a nominal GDP growth of 14 per cent for the year. According to the Reserve Bank of India, the GDP growth for fiscal 2021-22 is projected at 10.5 per cent.

Well-known global rating agency Moody’s says that the second wave of Covid-19 presents a risk to India’s growth prospects by weakening its economic recovery. Moody’s had predicted that the Indian economy will grow at 12 per cent in 2020-21 and at a higher 13.7 per cent in fiscal 2021-22. But these estimates were made in February 2021, and the second wave of infections presents a risk to the rating agency’s growth forecast as the re-imposition of virus management measures will curb economic activity and could dampen market and consumer sentiment. Citing Google mobility data, the rating agency pointed out that retail and recreational activity across India dropped by 25 per cent as of April 7, as compared with February 24. This was mirrored in the RBI’s March consumer confidence survey, which showed a deterioration in perceptions of the economic situation and expectations of decreased spending on non-essential items.

The second wave has derailed all previous forecasts. According to the latest analysis by a Chief Economist of leading Indian credit rating agency Care Ratings, the economy will be hit by close to Rs 1 lakh crore, and if the restrictions imposed against Covid-19 are extended after April, the loss could be much higher. Little wonder then that the Indian stock market which was literally booming during the first wave of Covid-19 has tanked during the second wave, and by the first fortnight of April the market value of listed companies lost over Rs 8 lakh crore in value.

It is incumbent on the government to take the situation very seriously. Instead of concentrating on election rallies, it should devise ways and means to contain the decline in the economy by coming out with imaginative and effective stimulus packages.