In Charts: Economic Activity Spurts In August
High frequency indicators in August and September indicate improved levels of activity.
Economic activity across India showed a spurt in August and early September, suggesting high frequency indicators across mobility, logistics and electricity consumption. The data, while encouraging, showed that activity remains below pre-Covid levels, putting the Indian economy on course for a double-digit contraction in FY21.
The year-on-year performance of 11 of the 16 available indicators improved in August 2020 relative to July, said Aditi Nayar, principal economist at ICRA, “The high frequency lead indicators for August suggest that a fragmented recovery is underway.”
The Nomura India Business Resumption Index threw up a similar trend and rose to 81.6 in the week ended Sept. 13 from 70.4 in the week ended Aug. 3.
Electricity Demand
Average demand for electricity during evening peak hours contracted 1.85% on an annual basis in August, according to daily reports published by the Power System Operation Corp. The gap over a year ago narrowed in August compared to July and closed fully in the early weeks of September.
Demand for electricity during evening peak hours rose 1.45% until Sept. 15, 2020, over a year ago, the data showed.
Google Mobility
The Google Mobility Tracker, which looks at movement across different categories, picked up more movement across places such as supermarkets and pharmacies.
Visits to supermarkets and pharmacies was 1% higher than the pre-Covid baseline between July 31 and Sept. 11. Visits to places of retail and recreation also showed a pick-up compared to previous months.
Rail freight
Among logistic indicators, rail freight tonnage rose 3.9% year-on-year in August after five consecutive months of contraction, according to the Directorate of Statistics and Economics, Indian Railways.
E- Way Bill Collections
Total e-way bill collections contracted 3.5% in August 2020 compared to collections in the year-ago period. While intra-state collections rose 1.4%, inter-state collections remained lower, contracting 10.4% on an annual basis.
Until Sept. 13, 2020, e-way bill collections rose to 45% of total collections in September 2019 for the full month.
Manufacturing & Services Activity
The India Manufacturing Purchasing Managers’ Index rose to 52 in August compared with 46 in July on a seasonally adjusted basis, according to IHS Markit. A print above 50 indicates expansion in business activity.
The services PMI index remained in contraction zone but improved materially to 41.8 in August from 34.2 in the previous month.
Not all indicators have picked up.
India’s trade deficit widened in August as a rebound in exports flattened out and imports rose sequentially led by higher shipments of gold. The trade deficit rose to $6.77 billion in August from a gap of $4.83 billion in July. Consumption of diesel, too, contracted 21% in August 2020 annually compared to a contraction of 19% in the preceding month.
“Unless the pandemic is kept in check, the recent pick-up in economic activity may not sustain and a return to pre-Covid levels will become more challenging,” Kotak Institutional Equities said in a Sept. 11 report. Private consumption and production growth will be linked closely to the evolution of the spread of Covid-19, the report said.
A number of economists are now predicting a double-digit contraction for the Indian economy in FY21, driven by a sharper-than-expected fall in GDP in the first quarter and the continued spread of the virus.
According to a score card by Oxford Economics, India remains at the bottom of the Asia-Pacific recovery. “In line with India’s lowest rank, we remain most pessimistic about its growth outlook within APAC,” said Priyanka Kishore, head of Asia and South-East Asia, macro and investor services at Oxford Economics.
The organisation has downgraded its 2020 growth forecast to -10% from -5.7% earlier, given no signs of the pandemic being contained yet and the low probability of a meaningful fiscal follow-through from the centre.