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Shaky Quarters, Stalled Recovery!

Rajeev Dubey     April 29, 2021

April-June 2021 was supposed to be the quarter of redemption. A quarter of 'Hope' that was to herald India's great economic recovery after Budget 2021 finally acted on reviving consumption in the economy with an unprecedented infrastructure push. Centre pumped in Rs 4.39 lakh crore into infrastructure in FY21 to trigger a public investment-led push to perk up demand, racking up a fiscal deficit of 9.5 per cent in the last fiscal.

Despite that, right at the beginning of this fiscal, it is amply clear that FY22 cannot bank on this quarter for better times ahead. In fact, April-June, 2021 could well go down in history as the quarter that stalled the recovery.

As unsuspecting Central and state governments wound up the massive emergency Covid-care hospitals across the country in January and February, they had no inkling that Covid-wave II was already building up across the country. Just when the governments had begun declaring victory over Covid, it struck like a tsunami in March. More contagious. More lethal. More devastating. Just like its trajectory everywhere else in the world caught nations gasping, India, too, has been caught unawares.

Prime Minister Narendra Modi has ruled out a hard lockdown for now. But that's little solace. Covid-wave II rampaging through India's most industrialised states is causing maximum disruption due to localised lockdowns. The initial impact on the loss of economic activity in just the top 10 states alone is likely to be Rs 1.5 lakh crore, according to SBI Research. But, more importantly, migration of labour from the industrial corridors has started and is set to hit production. Its consequences will be known in the coming weeks. So how does India extricate itself from the economic uncertainty? Joe C. Mathew & Ashutosh Kumar explore the limited options before the government. In a complementary story, Team BT discovers the ground reality of how industries are coping with the impact of the wave.

Meanwhile, after the barrage of NPAs in the past two years, the mainstay of the economy - India's banking sector - is experiencing new stress points. MSME loans, unsecured personal loans, credit cards and consumer durable loans are emerging as the new breeding ground for bank NPAs. Macquarie Securities says gross NPAs in retail could double to 4 per cent. The projection was made in December, when recovery seemed in sight. Now, with seven states accounting for nearly 45 per cent of all bank loans firmly in the grip of Covid, it may be a different story altogether. Anand Adhikari explains why loans worth Rs 28-30 lakh crore will need to be watched closely - very closely.

The good news amidst the pall of uncertainty is that India Inc has tightened its belt through the first year of the pandemic. Corporate balance sheets are leaner and fitter than ever before. Early bird FY21 results which have begun pouring since mid-April indicate that companies are set to report blockbuster results in the fiscal, though the outlook for the next fiscal - FY22 - stays clouded. IT leaders TCS, Infosys and Wipro have reported 14.9%, 17.5% and 27.7% growth in profits while revenues have expanded as well. Niti Kiran explains why we must expect metals, FMCG, specialty chemicals, banks, auto to post healthy results for the last fiscal. The current fiscal is another story though?

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