An unprecedented rise in covid-19 cases is likely to slow down India's economic recovery, but the overall impact will be milder in comparison to last year's devastation. Experts say that extent of economic loss during the second wave will primarily depend on how fast the chain of infections can be broken.

While covid-19 containment rules are less stringent compared to last year's nationwide lockdown, economic activity is gradually declining as more states for stricter norms to contain rapidly rising daily cases.

A number of retail and wholesale businesses have been deeply hurt by the localized lockdowns, but the fact that the movement of goods has not been stopped and industries are being allowed to function could significantly limit economic loss.

Rating agency CRISIL recently said in a note that the impact on industrial activity during the second wave is smaller in comparison to the devastation witnessed in 2020. Japanese brokerage from Nomura has also suggested that business activity has fallen, but it will have a limited impact on the economy.

There are reasons to expect a muted economic impact. The experience from other countries suggests a lower correlation between falling mobility and growth. Parts of the economy like manufacturing, agriculture, or work-from-home and online-based services should be resilient Nomura said in a note.