In response to the second COVID wave, the majority of Indian states imposed state-wide restrictions in May. The wider use of lockdowns is weighing on economic activity and also impacting labour market recovery, further increasing the existing divide across regions, sectors, and sub-industries. However, there are some signs of underlying economic resilience, especially for supply-side indicators than the demand-side. On a positive note, the virus containment efforts seem to be working to taper the number of daily cases, which may allow a gradual relaxation of lockdowns from June onward. As such, we expect the impact of the second COVID wave to be limited to Q1 FY22, followed by a quick rebound in subsequent quarters. We revise our growth projection down to 9.9% YoY for FY22 from 12.4% earlier.
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