On April 26th the Centre for Monitoring Indian Economy released employment data for the week ending April 25th, showing that the employment rate (total employed people as a share of the working age population) stood at 37.1%, down from an average of 37.7% in February.

Owing to a steep rise in coronavirus (Covid‑19) infection in April, and the broader imposition of city- and state-level lockdowns, we now expect the Indian economy to recover by 10.4% in fiscal year 2021/22 (April-March), compared with 13% previously. Our revised forecast assumes a quarter-on-quarter contraction of 5.9% in April-June 2021, when we expect the brunt of the new wave to be felt. 

However, the current strategy of enacting strict lockdowns only in overburdened states means that the decline in activity will be less severe than under the blanket nationwide lockdown imposed in April-May 2020. Although current restrictions are likely to be extended for at least another 2‑3 weeks to curb the rate of transmission, a return to a nationwide lockdown remains outside our core forecast.

Mobility data from Google (US) show that visits to retail and recreation sites in the calendar month to April 21st were down by around 40% compared to a pre-pandemic benchmark. We expect people’s mobility to decline further in the coming weeks as restrictions are applied.

The impact on activity was less severe, as industry remained outside the purview of renewed restrictions, which are also less stringent than the national lockdown last year. Electricity consumption rose in April relative to its 2019 level, albeit by less than in March. The employment rate also fell only modestly, owing to less stringent lockdowns, although that outcome is probably distorted by an increase in disguised unemployment in the agriculture sector.

Supply chains were also disrupted by restricted movement in April, but the negative impact was less severe than in the same period last year. E‑way bills (tax filing for the movement of goods) fell by nearly 50% month on month in April, dipping below their 2019 level. We expect further disruption in the coming weeks as more states tighten their restrictions, but a weakened link between mobility and activity, with businesses and consumers having adapted to the restrictions, will put a lid on it.

With renewed restrictions slowing growth momentum in the April-June quarter, we now expect real GDP to expand by 10.4% in 2021/22, down from 13% previously.

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