Lockdowns imposed by the States in April and May to contain the second wave of the deadly COVID-19 pandemic has likely led to the economy contracting by 12 per cent in the June 2021 quarter as against 23.9 per cent contraction in the same quarter in 2020, says a report by Swiss brokerage UBS Securities India. The economy had its worst contraction on record in FY21 at 7.3 per cent as the 2.5 months of unplanned lockdown announced by the Centre with just a four-hour notice had crippled the economy in the first quarter with a massive 23.9 per cent contraction, which improved to (-) 17.5 per cent in the second quarter.

But the economy showed a sharp V-shaped recovery from the second half when it posted 40-basis point positive growth, and in Q4, it clipped at 1.6 per cent, containing the overall contraction at 7.3 per cent for the year. This 12-percentage point contraction in the Q1 of FY22 will have the economy missing a sharp, V-shaped recovery this time around, unlike seen last year after the national lockdown was lifted. Consumer sentiment remains very weak this time around, as people are more worried about the pandemic than last year, says the report of the Swiss brokerage. 

Quoting in-house data from UBS India Activity Indicator, Tanvee Gupta Jain, an economist of the Swiss brokerage, says that the indicator suggests that economic activity has contracted by an average of 12 per cent in the June 2021 quarter as against 23.9 per cent in June 2020 quarter. This is despite the indicator rebounding to 88.7 in the week to June 13, up by 3 per cent week-on-week after many States eased localised mobility restrictions from the last week of May. Though the brokerage expects a sequential pick-up in economic activity from June, it believes that the economy may gain traction only from the second half.