As India remains rattled by the shock waves of the second Covid wave, returning to a pre-pandemic level is turning onerous for the economy.
“Industrial activity does not seem to have grown strongly in April 2021 as the second wave started intensifying during the month curtailing business activity and impacting confidence levels,” reports Dun & Bradstreet.
Several restrictions were imposed to contain the spread of infection. Due to this, uncertainty lingered, building obstacles for businesses and lowering the confidence of the customers.
Dun & Bradstreet expects the Index of Industrial Production (IIP) to have grown by more than 100 per cent during April 2021 as the government is prioritising the pandemic, curtailing the investment activity.
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Disruptions in the supply chain and high global commodity prices are expected to generate inflationary pressures in the economy.
The fall in the rupee will also add to the import price pressures.
The second round of indirect impact of the elevated oil prices is also expected to drive prices in logistics and food articles amongst others.
“We expect Consumer Price Inflation (CPI) to be in the range of 4.9 per cent - 5.1 per cent in May 2021 as the high base of last year would prevent a higher print of the headline inflation data,” says Dun & Bradstreet, adding that the range of Wholesale Price Inflation (WPI) might be between 12.8 per cent - 13.0 per cent.
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The introduction of the Government Security Acquisition Programme (GSAP) by the RBI is expected to keep the yield range-bound, reduce volatility and impart a softening bias in G-sec yields.
The decline in US treasury yield and weak domestic growth prospects are also likely to exert downward pressures on yields.
On the other hand, adverse global scenarios will impart upward pressure. Dun & Bradstreet thus expects the 15-91 day Treasury Bills yield to average at around 3.32 per cent -3.34 per cent and 10-year G
Sec yield at around 6.22 per cent -6.24 per cent during May 2021.
A rally in global and domestic stock markets and a weak dollar are expected to increase the rupee's upward trend. “The rupee is expected to remain at around 73.9-74.1 per US$ during May 2021,” reports Dun & Bradstreet.
“The percentage of businesses to have been disrupted, according to Dun & Bradstreet Covid-19 business disruption tracker, was 47 percent as of 1st week of May 2021, with 52 percent of estimated sales revenues and 56 percent of employees of associated firms being impacted as a result. Owing to the intensifying nature of the pandemic and the spread to the rural areas, which was largely spared in 2020, we expect growth prospects to have deteriorated for FY22,” comments Dr. Arun Singh, Global Chief Economist, Dun & Bradstreet.
