Chaos in India: business circles worry

Audio 04:06

Caregivers and relatives carry the body of a Covid-19 victim for cremation.

April 26, 2021, Jammu, India.

© Channi Anand / AP

By: Mounia Daoudi Follow

7 mins

India, the world's sixth-largest economy with 1.3 million inhabitants, is suffering the full brunt of a devastating second wave of Covid-19, the economic consequences of which are already being felt.

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Exceeded the forecasts of the International Monetary Fund which forecast on April 6 a solid rebound of 12.5% ​​this year for Indian growth.

In less than three weeks, hopes of a rapid recovery for Asia's third-largest economy were dashed.

Experts have already revised their estimates downwards.

The broker Nomura thus anticipates a contraction of the GDP of at least 1.5% compared to the last quarter.

And the Standard and Poor's rating agency is worried about impediments to economic activity that it believes could have repercussions on the global recovery.

The management of the second wave by the government of Narendra Modi worries

The Indian authorities have to manage a difficult equation: contain the epidemic while preserving the economy.

One thing is certain the nationalist Prime Minister does not want a general containment like the one he had imposed in disaster a year ago.

Two long months that had plunged the country into the first recession since its independence, with a GDP drop of nearly 24% between April and June and a record unemployment of 23%.

But even without widespread containment, the economic repercussions of this deadly pandemic are already here.

Faced with the surge in cases, some states, such as Maharashtra and its capital Bombay, which contributes 15% of the country's economy, have decided to impose local lockdowns.

This is also the case for New Delhi.

As a result, retail sales plunged, a significant risk for an economy where consumption represents 60% of GDP.

Another sign of a slowdown in activity, rail freight recorded a drop of 11% in April, while in India more than 30% of goods in the industrial sector are transported by rail.

The pandemic is already disrupting the supply chains of SMEs that make up the bulk of the country's economic fabric and causing labor shortages.

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