Second wave of Covid infections poses credit-negative threat to recovery: Moody's

Moody's Investors Service said on Tuesday the second wave of infections in India presents a risk to growth forecast as reimposition of virus management measures will curb economic activity which can dampen market and consumer sentiment.

Retail and recreation activity across India had dropped by 25 per cent as of April 7 compared with February 24, according to Google mobility data.

This was mirrored in the Reserve Bank of India's March consumer confidence survey which showed a deterioration in perceptions of the economic situation and expectations of decreased spending on non-essential items.

"However, given the focus on micro-containment zones to deal with current wave of infections as opposed to a nationwide lockdown, we expect that the impact on economic activity will be less severe than that seen in 2020," said Moody's.

India's relatively very young population help mitigate risks. And GDP is still likely to grow in double digits in 2021 given the low level of activity in 2020, it added.

On April 11, India recorded its highest daily surge in new coronavirus infections since the start of pandemic, pushing its active case load further past one million.

The announced counter-measures to combat the second wave -- some of which are due to remain in place at least until April-end -- risk weakening the economic recovery.

"However, the targeted nature of containment measures and rapid progress on vaccinating the population will mitigate the credit-negative impact," said Moody's adding vaccination will be a key element in managing the second wave as authorities balance virus management against maintaining economic activity.

India began its vaccination drive in mid-January and had administered 100 million doses of the coronavirus vaccine as of April 10, becoming the fastest country to reach that threshold so far.

However, a shortage of vaccines and India's nearly 1.4 billion person population -- which includes many people living in rural and more remote locations -- could slow progress of the vaccine rollout.

As of early April, around 7 per cent of the population had been inoculated. The vaccination drive was expanded to all citizens aged 45 years and above - about 25 per cent of the population as of 2019 - from April 1.

Workplace vaccination centres were also launched on April 11 which the government expects to facilitate inoculation among workers while minimising risk.

India has prioritised domestic vaccine distribution, delaying exports, amid the resurgence in coronavirus infections. On April 11, the government also placed a temporary prohibition on export of remdesivir which is used in treatment of coronavirus patients.

Maharashtra, the epicentre of the second surge, accounted for close to 50 per cent of the active case load as of April 12. Other states and territories including Uttar Pradesh, Chhattisgarh, Delhi and Karnataka have also reported a sharp rise in daily cases.

( With inputs from ANI )