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.
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