Our expectation of consumption recovery looking more tempered now than in FY21, is based on three conditions 1) Forced or involuntary savings getting replaced by precautionary savings 2) Exhaustion of some part of pent-up demand last year and 3) Rural demand losing its vigour amidst proliferation of the virus in rural centres.
Download ReportIndia Growth: The consumption snag
We recently revised our FY22 GDP growth estimate lower by 150 bps to 10.0% basis our assessment of the impact of the second wave of COVID infections. The sequential growth setback in Q1 FY22 will be dominated by demand destruction/deferment as opposed to Q1 FY21 which began with a supply disruption of massive proportion. Our expectation of consumption recovery looking more tempered now than in FY21, is based on three conditions – 1) ‘Forced’ or involuntary savings getting replaced by precautionary savings 2) Exhaustion of some part of pent-up demand last year and 3) Rural demand losing its vigour amidst proliferation of the virus in rural centres. In addition, a comparison of reactions of high frequency consumption-oriented indicators in the first lockdown with the early trends of the ongoing lockdown, suggest that compared to a V-shaped rebound in FY21, consumption recovery will look more U-shaped in FY22.