India: More resilient, but not immune to the second wave

The coronavirus resurgence in India is raising concerns that the recovery could be derailed, according to Oxford Economics. With state governments reluctant to reintroduce strict lockdowns, we think the economic impact will be much less severe than in the second quarter last year.

High-frequency data point to a slowdown in growth momentum in first quarter, which is already built into our forecasts. But these indicators are yet to show a sharp deceleration in response to the rapid increase in COVID-19 case counts.

Still, based on the international experience, the vaccination rate is far below the level required to contain the virus by itself. The second wave likely has some way to go both in height and breadth.

If the health situation worsens substantially and tighter restrictions are reimposed widely, this would threaten our baseline forecast for the first half of 2021.

India’s tally of total COVID-19 cases has increased at an alarming pace in recent da