The second wave of Covid-19 infections will have a prolonged negative impact on consumer sentiments, ICRA has stated in its report.
In addition, the rating agency notes that the substantial healthcare expenses related to the Covid-19 treatment, and high retail prices of fuels, are likely to squeeze disposable incomes in urban and rural areas. Moreover, after the satiation of the pent-up demand seen during the festive season in 2020, purchases of consumer durables maybe restricted, which would impact capacity utilisation in certain sectors.
"Overall, we expect discretionary spending on consumer durables and areas such as home improvements may be limited in the near term, in addition to the cut-back in spending on contact-intensive services," the rating agency has noted.
"Regardless of the high YoY expansion, many of the indicators such as GST e-way bills, fuel consumption, vehicle registrations, etc. displayed a slowing sequential momentum in April 2021, reflecting the rise in Covid-19 cases, and imposition of restrictions in various parts of the country.
Moreover, this trend has continued in May 2021 so far, with the restrictions spreading to many other states," the rating agency has noted.
Several other agencies have also highlighted the fact that growth in India for FY 2021-22 is likely to fall and many agencies have cut their GDP estimates.