India | Premature state re-openings could backfire

States are starting to relax lockdown measures as the second wave of Covid infections is showing signs of plateauing. As a result, national mobility has improved notably since the start of the month. As of June 18, total mobility (ex-residential) in India stood 22% below the baseline, according to Google data, up from 50% below baseline at the peak of the 2021 lockdown. The turnaround in mobility has been led by states that have witnessed a sharp drop in infections in recent weeks, including Delhi, Maharashtra, and Uttar Pradesh. Other states have also experienced improved mobility as case numbers have declined.

What you will learn:

• The rapid decline in Covid cases and test positivity rates has prompted states to start relaxing restrictions. While partial restrictions will likely to be extended into Q3, the reopening has started at a faster pace than we had expected.
• But vaccination rates are far below the levels deemed to be safe for easing social distancing measures substantially in the more populous and economically important states.
• We think this reopening strategy is not prudent and may result in a renewed rise in infections and re-tightening of restrictions in the future. Accordingly, we remain cautious and maintain our 2021 growth forecast at 9.1%.