Economy May Have Shrunk 12% In June Quarter Due To Covid Second Wave: Report

The 12 percentage point contraction in the June quarter may not be followed by a sharp V-shaped recovery due to weakened consumer sentiment as people are more worried about the pandemic than last year, according to UBS Securities India

The Indian economy may have contracted 12 per cent in the June quarter due to lockdowns imposed by the states in April and May to contain the second wave of the deadly Covid-19 pandemic, according to a report by UBS Securities India. The economy had contracted by 23.9 per cent in the same quarter last fiscal. The economy had contracted by 7.3 per cent in financial year 2021, marking its worst contraction on record, as the lockdown announced by the centre last year to check the first wave of the virus brought the economy to a grinding halt. In fact, the economy contracted by a massive 23.9 per cent in the June quarter and 17.5 per cent in the second quarter in the FY2021, before staging a V-shaped recovery in the two subsequent quarters on the back of a gradual easing in the lockdown norms. However, the 12 percentage point contraction in the June quarter may not be followed by a sharp V-shaped recovery this time around due to weakened consumer sentiment as people are more worried about the pandemic than last year, according to the Swiss brokerage UBS Securities India. The brokerage house expects a sequential pick-up in economic activity from June, but is of the opinion that the economy may gain traction only from the second half.