The field affected by India threatens to undermine the recovery

India’s financial markets have recovered from the crisis caused by the country’s devastating second wave of coronaviruses, with near-historic highs.

But outside of cities, rural families continue to put their lives together, even as public health officials warn that there is a third wave on the horizon.

“It simply came to our notice then title numbers come back, but that doesn’t mean it’s all over, ”said Dharmakirti Joshi, chief economist at CRISIL, a credit rating agency.

The shocking human cost of India’s Covid wave was exposed last month by images of drones showing hundreds of shallow graves along the sacred Ganges River.

Despite an acceleration vaccines push, analysts warn calamity weighs heavily on India’s economic outlook, too, dampening the country consumer demand that policymakers hoped to revive growth.

“The population is psychologically traumatized“All investment plans (all sustainable consumption plans) will be postponed,” said Jahangir Aziz, head of JPMorgan’s emerging market economy.

Until the emergence of the Delta variant, first detected by Indian scientists in rural Maharashtra in February, the Indian economy was expected to record double-digit growth after a contraction of 7.3. % last year.

But the second wave pushed the Reserve Bank of India’s consumer confidence index to an all-time low of 48.5, from 84 before the pandemic. As of April 1, the virus is known to have infected about 18 million people and caused at least 232,000 lives. Analysts suspect that real toll it is much superior.

Recently, the RBI has reduced its estimate of gross domestic product growth this year to 9.5%, below 10.5%. JPMorgan predicts that India will grow by only 9%, which Aziz said would leave the economy 10% smaller than its pre-pandemic levels.

“Anyone connected to the global market will do very well,” he said. “But Indian consumption, Indian investment and small Indian businesses will be damaged to a level that is even hard to imagine. Beyond the essentials, people will be a lot, very prudent about the purchase “.

Workers in India were hit hard last year when 100 million jobs evaporated overnight in a tight closure, causing an exodus to the countryside. By the end of 2020, it is estimated that about 15 million urban workers were still unemployed, while those in employment were earning less than before, according to a study by Azim Premji University.

Strong performance a agriculture, which grew 3.6% last year thanks to heavy monsoon rains, and the government’s heavy spending on rural work plans helped cushion the blow.

But in a country where patients pay about 70 percent of health care spending, the Covid increase forced millions of families to take advantage of savings, sell assets or apply for loans to treat loved ones who were in a state of illness.

This shock runs the risk of depressing consumer sentiment for months, especially among middle-class and working-class families. “Health expenses they are eating on the balance sheets of households, especially the poorest households, ”said Joshi.

Shobhnath Patel, a 38-year-old karate instructor in rural Uttar Pradesh, said his family had struggled since the pandemic forced the cancellation of their classes, two nephews lost their jobs at the his brother’s car industry and home paint business collapsed.

When his older brother was beaten with Covid in April, the family ran out of Rs 80,000 in an ambulance in the nearby town of Varanasi, doctors ’fees, an oxygen tank, medicines and medical bills. hospital in a failed bid to save. he.

Other families in the village of Patel, Paterwa, suffered similar setbacks, as the virus affected at least one member of each household and caused a dozen lives.

“The economic situation of most people is at a very delicate point,” Patel told the Financial Times. “So many people spent a lot of money on treating family members. Marriages, plans to build a house, or any of these important things will have to be suspended. Every family has suffered. “

Taken by surprise by the second wave, many Indians seem resigned to the inevitability of a third wave, which will also weigh on demand. “There’s a lot of uncertainty,” Joshi said. “No one can predict the severity that another wave could have.”

So far India has administered 315 million doses of vaccine, or about 23 doses per 100 people, well below the threshold for safe economic reopening, although the pace of inoculation is accelerating. But, as Aziz of JPMorgan pointed out, “any increase in mobility runs the risk of reactivating another wave.”

Pessimism is not universal. Saurabh Mukherjea, founder of Marcellus Investment Managers, said “business activity is recovering rapidly” as restrictions are eased, while public transport anxiety, along with cheap funding, fuels demand for cars and motorcycles. “No one wants to get on public transportation,” he said.

But he admitted that the sustainability of any rise in consumer demand depended on the trajectory of the virus. “If we step on a third wave again, we will return to stagnation.”