Indian recovery will need to be resilient against a probable second wave of Covid-19 infections

Rising positivity rates in some states are raising the spectre of a return of the Covid-19 outbreak, this time in smaller towns and villages. Unless this is contained at the earliest, it could undo all the good work done over the last 4-5 months.

India needs to be very careful about the “emerging second peak” of the Covid, Prime Minister Narendra Modi told chief ministers of states at a virtual meeting, where he reiterated the criticality of stopping the spread of the pandemic.

Rising incidence of Covid could engender both a renewed health crisis but also derail the robust recovery witnessed in many segments of the Indian economy over the last couple of quarters.

“If we don't stop this right now, then there could be a situation of a nationwide outbreak. We have to immediately stop the emerging second peak and take big and decisive steps,” Modi told the chief ministers, adding: “The self-confidence that we gained in our corona fight should not turn into overconfidence. Our success should not be the reason for carelessness.”

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Over the last fortnight, almost 20 per cent of Indian districts – 125 out of 718 – have recorded an increase of 100 per cent or more in Covid-19 cases, an official of the Ministry of Health told the media. Of these, 70 districts across 16 states have seen cases increases more than 150 per cent, and 55 districts have reported increases of 100-150 per cent. Overall, across India, there has been a 43 per cent increase in new cases and a 37 per cent growth in fatalities.

Government concerned at fall in tests

The government is particularly concerned at the decline in the number of tests, rising positivity and declining number of RT-PCR tests in some states. The health ministry is particularly concerned the rising incidences of both cases and positivity in Maharashtra, Punjab, Chandigarh, Chhattisgarh, Gujarat, Karnataka, Madhya Pradesh, Rajasthan, Haryana, Delhi, Himachal Pradesh and Andhra Pradesh.

“The lowest point in new cases came on February 9 when 9,110 cases were being reported. But now, we are reporting 28,902 cases,” Health Secretary Rajesh Bhushan told the media.ide.

Maharashtra the epicentre

Maharashtra, which is India’s most industrialised state, has emerged as the epicentre of the second wave of Covid, has about 60 per cent of the country’s India’s active cases and 45 per cent of all new deaths, the health ministry said. Maharashtra has a positivity rate of 16 per cent, Punjab 6.8 per cent and Chandigarh 7.4 per cent. Overall, the national positivity rate is 4.99 per cent and the recovery rate is 96 per cent.

Worryingly, the second wave of Covid seems to be reaching the smaller towns that had largely been spared its first coming. The government is worried that it could also reach the villages, which have hardly felt the impact of the outbreak so far.

Auto down to a trickle in Nagpur

In Nagpur, for example, the statement government was forced to impose a weeklong lockdown to control the spread of the virus. This has already started telling on automobile sales in the town, with many buyers deferring their purchase decisions and others, who had booked cars, informing dealers that they would take deliveries later.

Industry analysts are warning that Nagpur could just be the trailer of what could follow for the broader economy if the renewed surge in cases is not arrested.

The impact on rural economy

They are particularly concerned about the impact of Covid on the rural economy, which has provided the ballast for India’s nascent but V-shaped recovery. A good monsoon has delivered back-to-back bumper kharif and rabi harvests. And rising rural prosperity has fed demand provided the consumption boost to a range of sectors like fast moving consumer goods, automobiles, commercial vehicles, cement, steel, fertilisers, power and fuel, among several others.

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The rural economy accounts for more than 40 per cent of India’s GDP. So, any disruption of demand in rural India will set back India’s recovery trajectory by a disproportionate amount.

The Prime Minister referred to this issue obliquely when he told the chief ministers: “Covid-19 has spread mainly in metro cities, Tier-1 and Tier-II cities, but we must prevent it from reaching remote areas. If it does, our system may not have sufficient capability yet to handle the pandemic on that large a scale."

Ajay Bakaya, MD, Sarovar Hotels, told The Economic Times, India’s leading financial daily: “While we are out of critical care, we still need some tender love and care to move on. India is a large and diverse country and it is a long haul… We still have areas like Kerala which are suffering in a big way and have not recovered… We need to remain cautious, but positive.”

Why Covid 2.0 is scaring analysts

After falling a dramatic 24.1 per cent in the first quarter of the current year and 7.5 per cent in the second, pushing India into a technical recession. But a receding Covid graph and robust consumption demand, especially from the rural segment of the economy, has placed the economy back on the growth path.

Most international and domestic analysts expect the Indian economy to growth at 10-14 per cent in 2021-22, pushing it back to the top of the league of fastest growing major economies in the world.

But for this to happen, Covid has to be contained and the fear that constrains consumer spending must be contained.

That is why second wave of Covid poses a very real threat to India’s economic growth.