Till December, the economy had rebounded better and faster than expected. January onwards we have started tottering a little and by the time we have come to February and March, it is looking like a redux of 2020?
Rahul Bajoria: I would say we are entering the new fiscal year with a fair amount of optimism around growth. While Covid cases are increasing, there are two features that make the current Covid wave a little bit more different from the first wave.
First of all, in the second wave, there is a geographical concentration in some of the western states. This is likely to spread out but then the second factor is low mortality rates. That makes both central and state governments unlikely to pursue lockdowns because the capacity on the health side is still much more significant and the treatment protocols are much better. The probability of a full lockdown or any kind of a hard lockdown still appears remote and the growth impact is likely to be very limited. It will be more like a speed bump rather than a complete blockade in terms of economic mobility over the next couple of months but then the situation definitely is fluid. We have to treat it as a downside risk in the ongoing recovery process.
So we know a couple of things for sure, we know that there is not going to be a nationwide lockdown, that the manufacturing unit can continue to function. What do you see as the major headwinds as we continue on the recovery process right now?
Rahul Bajoria: One will have to watch out for the impact on the high contact services like travel and tourism. Already there are some signs that travel restrictions have tightened, states are asking for more testing etc. and they are asking for more quarantining. But at the same time, there is also a deliberate pullback by travellers, cutting back on non-essential travel. It is really the pace of vaccination that will dictate at what pace we normalise in terms of mobility because we have seen in other countries that the second lockdown tends to have a lot less impact on growth and activity levels.
We have seen this in Europe, we have seen this in the UK, we have seen this in several countries in Southeast Asia as well. India is likely to have a very similar experience but it is really vaccinations that will ultimately help us open up for good. It is important to track the supply dynamics of vaccines. How many more vaccines are we approving and then how many people are we able to actually vaccinate, especially if we can meet the 300 million target that has been set for August. That will be a very significant outcome, at least for achieving some kind of a permanent opening up of the economy, particularly of the high contact services.
Do you want to take a guess on any timelines – as we see it for the next fiscal? When do you see possible vaccinations and their impact kicking in and that business confidence returning?
Rahul Bajoria: In terms of the timeline, India is already running a little bit ahead in terms of the schedule that we thought India was going to largely adhere to looking at the supply dynamics of vaccines. It is quite likely that we will be close to around by our calculations around 285 million people vaccinated by the end of August and so just slightly below the 300 million mark and then by the end of this year, we could be close to around 500 million people vaccinated if the supply dynamics hold up and the vaccine hesitancy declines. It is possible that by the end of this calendar year. Hopefully, we will be a little bit ahead of the cycle to capitalise on the festive season but by the time we hit Q4, we should be largely normalised from a vaccination standpoint. That will really pave the way for a complete opening up of the economy as we enter 2022.