That Dark Summer Again

After a stellar earnings season in Q4 of FY21, India’s growth engine seems to have lost its steam in the June quarter because of the second wave of the Covid-19 pandemic.

- ANTO T. JOSEPH

India’s growth engine has eased off the throttle. The surging second wave of the Covid-19 pandemic has forced it to slow down and move at a moderate pace. After a rev-up in the fourth quarter of 2020-21, which resulted in an extremely good earnings season, the beginning of the new financial year is shrouded in opacity. In the first half of the June quarter, there has been a significant slowdown of mobile phone manufacturing, owing to localised lockdowns, a shortage of semiconductors, and a surge in viral infections in factories across the country.

After sales of automobiles, mobile phones, electronic equipment, air conditioners, air coolers, and refrigerators, among many others, hit a rough patch, policymakers and companies hope that the current phase will not be as terrible as the summer of 2020. Almost every category had seen a major dip last summer.

While the first wave last year was primarily restricted to urban centres, the new wave seems to have ravaged the rural markets. According to data shared by the Federation of Automobile Dealers Associations (FADA), two-wheeler sales in April 2021 dropped nearly 28% from the previous month to 865,134 units, while tractor sales, which have for long shown resilience, fell by nearly 45% from March. The overall sales in April reported a 28% fall month-on-month to 1,185,374 units, FADA said. Industry watchers aver that it is “bad news for the domestic auto industry” as it usually banks on rural sales to buffer slackening demand in urban India.

“The re-imposition of lockdown measures will curb economic activity and could dampen market and consumer sentiment. However, we do not expect the impact to be as severe as during the first wave,” said Moody’s Investors Service in a statement.