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Local Lockdowns to Cost Indian economy up to $38 billion till June says Barclays

Holding liable on the slow pace of vaccinations and uncertainty around the number of those infected and dead in the second wave of COVID-19, global brokerage firm Barclays cut India's FY22 GDP growth estimate to 10% from earlier 11%.

If the in-progress localized lockdowns continue till June, it will lead to economic losses of USD 38.4 billion. In a more cynical scenario of the pandemic not being brought under control soon and mobility restrictions continuing till August, the growth can fall to 8.8 percent, warned Barclays. The country's economy is estimated to contract by 7.6 percent in FY21 as the pandemic-induced lockdowns led to disturbing economic activity such as hurting or loss of jobs and demand. The lower base is set to help the economy in posting a faster growth in FY22, but the ongoing second wave and resultant localized lockdowns have led many analysts to review down their forecasts. The RBI is maintaining that the economy will grow at 10.5 percent this fiscal. 

Meantime, analysts at rating agency Crisil said the second wave is closing in on rural India from being concentrated on the urban centers, with nearly a third of new infections coming from the rural areas now as against 21 percent in March.

At the same time, India's vaccination process has slowed, weighed down by rising supply constraints and logistical challenges, it said, adding that the move to liberalize vaccinations is unlikely to have any impact in the short term. The economic costs of the current surge in cases are much lower than during last year's national lockdown, but the bill is rising, it said, estimating economic losses of USD 38.4 billion, with restrictions likely in place until the end of June. 

Meantime, analysts at rating agency Crisil said the second wave is closing in on rural India from being concentrated on the urban centers, with nearly a third of new infections coming from the rural areas now as against 21 percent in March. As a result of the localized lockdowns, retail mobility, toll collection, GST e-way bills volume and railway freight loading have been impacted in the last few weeks as well.

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