States' Reopening Strategy Not Prudent Due to Low Vaccination Rates, Surge in Cases Expected: Report

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States' re-opening strategy in the wake of decline in COVID cases is not "prudent" and might even result in rise in infections as vaccine coverage remains low in many states, global forecasting firm Oxford Economics said on Wednesday. In a report, it also said, "we remain cautious and maintain our 2021 growth forecast at 9.1 per cent," citing that economic data does not support an upward revision at this point.

The rapid decline in COVID cases and test positivity rates has prompted many states to relax restrictions that are in place to curb the spreading of coronavirus infections. Against this backdrop, Oxford Economics also said vaccination rates are far below the levels deemed to be safe for easing social distancing measures substantially in the more populous and economically important states.

While partial restrictions are likely to be extended into the third quarter of the calendar year 2021, the re-opening has started at a faster pace than it had expected, it noted. "… we think this reopening strategy is not prudent and may result in a renewed rise in infections and re-tightening of restrictions in the future," Oxford Economics said. From a daily case count of over 4 lakh during the peak of the second COVID wave, the numbers have been hovering around 50,000 in the last few days and the unlock process is underway across cities.

According to the report, re-opening has commenced at a faster pace than it had anticipated as states have focused on declining test positivity rates as the guiding factor for easing measures rather than the share of population vaccinated. "This strategy could create a challenge going forward if infections increase again, especially as we head towards the festive months, and vaccine coverage remains low in many states, including the more populous ones," it said.

Oxford Economics noted that while high frequency indicators for June have improved as states have relaxed restrictions, the hit to activity in May appears to be larger than its initial assessment. "This may lead us to lower our Q2 2021 growth forecast once we have greater clarity on economic progress through June," it added.

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