The campaign hit by India threatens to undermine the recovery

India’s financial markets have mounted a rolling recovery from the recession caused by the devastating second wave of coronaviruses in the country, with stocks near all-time highs.

But outside of cities, rural families are still reuniting their lives even when public health officials warn that a third wave is on the horizon.

“You can see title numbers to return, but that doesn’t mean everything is dory, ”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 drone footage showing hundreds of graves buried along the sacred Ganges river.

Despite an acceleration vaccinations are pushing, analysts warn that calamity weighs heavily on India’s economic outlook, also dampening consumer demand that lawmakers hoped to revive growth.

“The population is psychologically traumatized“Said Jahangir Aziz, head of the emerging market economy at JPMorgan.” All investment plans – all sustainable consumption plans – will be postponed. “

Until the emergence of the Delta variant, first noted by Indian scientists in rural Maharashtra in February, the Indian economy was projected to record double-digit growth after a 7.3 per cent contraction 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. Since April 1, the virus is known to have infected about 18 million people and killed at least 232,000 victims. Analysts suspect that true toll it is much higher.

The RBI has recently reduced its estimate of gross domestic product growth for this year to 9.5 per cent, from 10.5 per cent. JPMorgan predicts that India will grow only 9 percent, which Aziz said will leave the economy about 10 percent lower than its projected levels for the pre-pandemic.

“Anyone connected to the global market will do very well,” he said. “But Indian consumption, Indian investment and small Indian businesses are going to be damaged to a level at which it is difficult for one to even imagine. Beyond the essentials, people are going to be a lot, very careful to buy “.

Workers in India were hit hard last year when 100m jobs evaporated overnight into a tight range, triggering an exodus towards the countryside. By the end of 2020, an estimated 15m former urban workers were still unemployed, while those in employment were earning less than before, according to a study by Azim University Awards.

Strong performance in agriculture, which grew 3.6 percent last year thanks to heavy monsoon rains, and heavy government spending on rural labor schemes have helped ease the blow.

Villagers in the state of Uttar Pradesh
Farmers in the state of Uttar Pradesh are attending a meeting. Vaccination efforts have been hampered by fear and mistrust, particularly in rural areas, where two-thirds of the Indian population lives © Rajesh Kumar Singh / AP

But in a country where patients pay themselves nearly 70 percent of health care costs, the Covid source has forced millions of families to exploit savings, sell goods or borrow to care for their loved ones.

That shock risks depressing consumer sentiment for months, particularly in middle-class and working-class households. “Health expenses they eat into the budgets of families, especially the poorest families, ”Joshi said.

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, in which two grandchildren lost their jobs in the automotive industry and that brother’s house painting business has collapsed.

When his older brother was hit by Covid in April, the family ran out of his savings of Rs 80,000 ($ 1,080) in an ambulance in the nearby town of Varanasi, doctors ’rights, an oxygen cylinder, medicines and hospital bills in a successful attempt to save him.

Shobnath Patel
Shobhnath Patel had to cancel his karate lessons. His family then spent their £ 80,000 savings on medical bills in a failed attempt to save their brother Covid.

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

“The economic situation of most people is at a very delicate point,” Patel told the Financial Times. “A lot of people have spent a lot of money to treat family members. Weddings, plans to build a house or one of these great things should be put on hold. Every family has suffered. ”

Frightened by the second wave, many Indians seem resigned to the inevitability of a third wave, which will also weigh on demand. “There’s a huge amount of uncertainty,” Joshi said. “No one can predict the gravity of another wave.”

India has so far administered 315m doses of vaccine, or about 23 doses per 100 people, well below the threshold for a safe economic reopening, although the pace of inoculation is accelerating. But, as JPMorgan’s Aziz remarked, “any increase in mobility runs the risk of reviving another wave.”

Pessimism is not universal. Saurabh Mukherjea, founder of Marcellus Investment Managers, said that “business activity is recovering rapidly” as restrictions ease, while anxiety over public transport, accompanied by affordable financing, fuels demand. of cars and motorcycles. “No one wants to go on public transportation,” he said.

But he admitted that the sustainability of any backlog of consumer demand depended on the trajectory of the virus. “If we go back to a third wave, we’ll go back to stagnation.”

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