India's Second Covid-19 Wave: A Hit to the Country's Economic Recovery (preprint)

ABSTRACT

Amidst fears of a third wave, India is beginning to reopen after the second wave of COVID-19 infections that wreaked havoc in the country in April and May 2021. The number of average daily cases has fallen to just over 50,000 in recent days, down from the peak of around 400,000 on May 9. Several factors are behind the second wave of the pandemic in India. Among many factors, election rallies and religious festivals were blamed for the second wave. The situation only got worse as India's health system collapsed during the second wave. India was on a good track for economic recovery after a devastating loss in 2020. In January‒March 2021, right before the second wave, India’s annual economic growth rate was estimated at 1.6 percent, recording a slight pick-up compared with the previous three months. Also, GDP growth in the year 2021 was estimated to be in double digits initially. However, India’s economic recovery will now be slowed down due to the economic damage from an enormous second COVID-19 wave, and further localized mobility restrictions since March 2021. As of June 2021, the second wave appears to be over with most of India’s major cities easing restrictions and reopening the economy. We can expect India will be back on track for economic recovery as manufacturing and export restart. But this does not mean that India's economy can recover to the pre-pandemic level anytime soon. There is already talk about the next wave with medical experts making predictions of a possible third wave in September. The solution to the impending crisis and minimizing an additional economic hit from the third wave would be speeding up the vaccination programs.