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Date - 17th Jun 2021

The Swiss brokerage UBS Securities India reported on June 17, 2021, that restrictions imposed in April and May 2021 after the second wave of the pandemic caused the country's economy to contract by 12 percent in the first quarter of the financial year 2022.

In 2020, the first quarter decreased by 23.9%. The economy saw its largest contraction in financial year 21, at 7.3%, as the Center announced a 2.5-month unscheduled lockdown in just four hours. This hurt the economy in the first quarter, registering a 23.9% contraction, which subsequently improved to 17.5% in the second quarter.

Moving forward, the economy posted a sharp V-shaped recovery from the second half, when it posted positive growth of 40 basis points, capped at 1.6% in the fourth quarter, keeping the overall contraction at 7.3% for the year.

What will the 12 percent cut mean for the economy?

Tanvi Gupta Jain, an economist at a Swiss brokerage firm, said the data from UBS-India activity indicators show that economic activity contracted by an average of 12% in June 2021, compared with a 23.9% contraction in June 2020

This despite the fact that the indicator rose to 88.7 in the week before June 13, up 3% from the week after many states eased mobility restrictions since the last week of May.

Will the economy recover? If so, what will it look like?

The report also says that with this 12 percent contraction, the economy will not see a sharp V-shaped recovery this time, unlike last year. Consumer sentiment remains very weak this time around as people panic more over the pandemic compared to the previous year. The Swiss brokerage expects a consistent pickup in economic activity since June, but the overall economy will only pick up momentum in the second half.

The economy is expected to recover gradually this time, in contrast to the V-shaped recovery in 2020. Jane added that the brokerage expects the economy to gain momentum in the second half due to increased vaccinations and increased consumer and business confidence. During the second wave of the pandemic, isolation lasted slightly longer than the 2.5 months of isolation during the first wave. Limited construction or industrial activities are allowed this time.

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