'Second wave' of COVID-19 infections impacting business normalization: Nomura

The Nomura India Business Resumption Index dipped to 95.1 for the week to March 21 from 95.4 in the previous week as a result of the rising infections, the brokerage said. 

COVID-19 infections are rising to new heights across the country and many local governments have been forced to re-introduce stricter measures like night-time curfews and sealing off premises in order to contain the spread. 

“The pandemic's second wave is now spreading to states outside Maharashtra and is starting to impact mobility. This suggests a likely sequential dip in contact-based services and a near-term delay of normalization,” it said. 

The brokerage added that it expects the impact to be “more transitory and muted”, as factory operations remain uninterrupted, consumers and businesses have adapted to the new normal and medium-term tailwinds like vaccinations, global growth, easy financial conditions continue. 

It said as of mid-March, Google workplace and retail and recreation mobility fell by 3.7 percentage points on a week-on-week basis and 0.3 percentage points, respectively, while the more updated Apple driving index fell by 2.6 percentage points. 

However, power demand improved by 2.6 per cent week-on-week after a 0.6 per cent decline the prior week, while the labour participation rate inched up to 40.6 per cent from 39.5 per cent. 

The knock-on effect of the second wave on mobility suggests a likely sequential dip in contact-based services and a near-term delay of normalization, it said. 

The medium-term tailwinds from the lagged impact of easy financial conditions, fiscal activism, strong global growth and continuing vaccine momentum will support real GDP growth of 13.5 per cent in FY22, up from a contraction of 7.4 per cent in FY21, it said.