The pandemic has added woes to an already slowing economy as is evident from the extent of contraction in Q1 F2021. However, the current business situation is constantly evolving. The latest and high-frequency data suggests that the economy is gradually recovering after the unlock. Supply-side activities are resuming , with every phase of the economic unlock being designed to limit economic disruptions. The initial pent-up demand has also aided in the economic rebound as seen in the months following the unlock. Many factors would have to be considered to determine if this rapid rebound is sustainable going forward.
Social distancing norms, the rising number of infection, and partial regional lockdowns continue to keep domestic demand low and economic activity below the pre-pandemic level. Financial and employment uncertainties have led Indian consumers to save more and spend less on discretionary goods, stated Deloitte’s consumer behaviour survey. Lower demand is also limiting business investment in capital projects and delaying hiring decisions. In other words, low confidence amongst consumers and businesses, as is reported by the RBI, will likely limit the speed of economic rebound.
With COVID-19 here to stay, we are yet to see how the economy will emerge out of this crisis and grow stronger amidst disruptions and uncertainties. Government and businesses are addressing this crisis with resilience. We need to continue to understand the emerging norms and tap into opportunities presented by them to recover and thrive in the future, despite uncertainties.
Source: Financial Express
