Households have lost a whopping ₹13 lakh crore of their incomes from the pandemic-induced job losses, according to a report that also warns of the economy losing momentum by mid-2021 on a likely slowdown in consumption demand that has propped the economy in recent months.
‘Could slow by mid-2021’
Describing the growth momentum seen in the second and third quarters of FY21 as a positive surprise, economists at UBS Securities India led by Tanvee Gupta Jain said the economy could slow by mid-2021 as households that lost incomes during the pandemic to the tune of ₹13 lakh crore could drag consumption with a lag.
In the second quarter of the current financial year, the GDP contraction narrowed to 7.5%, while in Q3, it grew 40 basis points (bps).
Given this, sustainability of the recovery seen in the second and third quarters and also the growth outlook are dependent on the revival in new investment intentions and easing of financial sector stress.