SBI Special Report – COVID-19 – The Race to Finishing Line

Mumbai: Presented here is a report by State Bank of India’s Economic Research Department – COVID-19: The race to finishing line!

The report has been authored by Dr. Soumya Kanti Ghosh, Group Chief Economic Adviser, State Bank of India.

Summary of the report:

COVID UPDATE: GLOBAL & INDIA

• Global experience shows that countries with high per capita GDP have been associated with higher COVID[1]19 deaths per million, while low per capita countries are associated with low COVID-19 deaths, revealing high income countries suffered more during the pandemic
• Delta strain has been detected in the U.S., the U.K., China, Japan, Poland, Portugal, Russia, and Switzerland. It is the dominant variant in the U.K. and now accounts for 95% of cases being sequenced. Even reasonably vaccinated countries like the UK have been witnessing increase in new cases. For example,
• Israel has vaccinated nearly 60% of its population completely. Even amongst the children in the age group 12-18 years, 33% have received the first dose and 23.8% have got the 2 doses
• However, even then cases have again started increasing since last week of Jun’21 (daily new cases average of around 250) with 2125 active cases including 50 hospitalised
• In India we have 51 cases of Delta Plus variant in 12 states by end-Jun
• New cases in top 15 districts, which are mostly urban increased again in Jun’21. But the good thing is that their fatality rate has been constant for 3 months
• However, the share of rural districts in new cases has refused to decline meaningfully since July 2020, when it breached 45% and has vacillated since then. Vaccination seems to be the only answer
• Global data shows that on an average third wave peak cases are around 1.7 times the peak cases at the time of second wave
• India has achieved its second wave peak on 7 May’21 and going by the current data, India can experience cases around 10,000 somewhere around 2nd week of July. However, the cases can start rising by second fortnight of August!

 

VACCINE UPDATE

• Indian experience shows that states with high per capita GDP have been associated with higher COVID-19 deaths per million, while low per capita GDP are associated with low COVID-19 deaths. Bihar, Jharkhand, UP, Assam, Odisha, Rajasthan all have low per capita income and low deaths per million. At the same time, Maharashtra, Uttarakhand, Kerala, Karnataka, Tamil Nadu, Himachal Pradesh have high per capita income and high deaths per million
• Pace of vaccination in India picked up recently after the Centre changed the vaccination strategy. The country is now receiving more than 40 lakh vaccination doses per day as shown by 7D MA
• The cases are now hovering around 45,000 from the past 7 days. In the first wave as well, the cases declined gradually, with cases above 45,000 for around 21 days before any meaningful decline in daily cases
• Certain States like Rajasthan, Delhi, Himachal Pradesh, Kerala and Uttarakhand have already given vaccine double dose to larger percentage of population above 60 years. Total vaccine doses as % of population above 60 years is more than 100% for these states, implying double dose to many
• Overall vaccination in rural areas remains low. Certain States like Gujarat, Karnataka, Kerala, Andhra Pradesh Uttarakhand and Rajasthan have vaccinated greater proportion of rural population when compared to others

 

ECONOMIC ACTIVITY

• Various indicators show improvement in economic activity in Jun’21. SBI business activity index shows significant improvement in activity since May-end with the latest reading for the week ended 28 Jun’21 of 91.8
• PV sales increased as visible in various companies’ data. Replacement demand and increase in inventories apart from a pick-up in demand could be the possible reasons for such an increase
• COVID-19 has impacted lives and livelihood across the economies and business sectors. The trends of deposits during first wave (March-December, 2020) of COVID-19 as revealed by ASCBs data from RBI for 711 districts across all States/UTs show deposit outflows from 112 districts at Rs 1.06 lakh crore
• However, between March 2021 and March 2020, the deposit outflow only declined to Rs 38,295 crore from 61 districts in the country indicating a revival in activity
• The beginning of the 2nd wave, however, has resulted in significant deposit outflows from banking system in alternated fortnights, the pace of which has now again moderated
• One of the worrying features is the increase in household stress. Household debt (after taking into account retail loans, crop loans and business loans from financial institutions, viz., commercial banks, credit societies, NBFCs, HFCs etc.) has sharply increased to 37.3% of GDP in FY21 from 32.5% of GDP in FY20
• The decline in bank deposits in FY21 and the concomitant increase in health expenditure may result in further increase in household debt to GDP in FY22
• India’s household debt to GDP ratio is still lower than other countries, though we need to supplement wage income as a percentage of GDP that has been declining. If we proxy employee expenses as wage income, as % of corporate GVA for our sample of 3973 listed companies, it has come down to 30.6% in FY21 from 34.1% in FY20

 

 

SBI Special Report – COVID-… by DeshGujarat