Covid-19 Second Wave: How Badly Was The Economy Hurt In May? 
A health worker takes a swab sample at a Covid-19 testing site set up at the Panchayat house of a village in the Gautam Budh Nagar district of Noida, Uttar Pradesh, India, on Sunday, May 30, 2021. Photographer: Anindito Mukherjee/Bloomberg

Covid-19 Second Wave: How Badly Was The Economy Hurt In May? 

Real economy indicators continued to weaken in May as more states went into lockdowns and spreading infections made it tougher to keep businesses going.

Monthly indicators available so far such as electricity consumption and e-way bill collections, show that economic activity weakened in May compared to April. Some indicators like rail freight continued to hold up.

To be sure, most indicators are still above levels seen in April and May last year.

Unemployment Rate: 12-Month High

Unemployment rate, as measured by CMIE, rose to 11.9% in May 2021, compared to 8% in April. Urban areas continued to record higher unemployment in comparison to rural areas.

Weekly data indicates that the unemployment rate eased thereafter, falling to 12.15% for the week ended May 30, 2021, from 14.7% in the preceding week.

The steady and substantial rise in the unemployment rate in May is likely to be the result of loss of employment during the month, Mahesh Vyas, managing director at CMIE, said in a note on the company’s website on May 24. This is because there is no increase in the labour participation rate that could have also caused an increase in the unemployment rate, he explained.

MGNREGA: Employment Provided At 12-Month Low

Demand for work under the government’s flagship employment guarantee scheme has remained high since the onset of the pandemic and rose for the third straight month in May. However, supply of work fell to the lowest since April last year, exacerbating the demand-supply crunch in work.

Over 2.76 crore households demanded work under the Mahatma Gandhi National Rural Employment Scheme in May 2021. Employment was provided to 1.66 crore households, the monthly data shows.

Electricity Demand

Average demand for electricity met during evening peak hours contracted by 11.34% for the month of May 2021, on a monthly basis, when compared to April. However, it showed signs of a pick-up beginning in the third week of May.

E-Way Bill Collections: 12-Month Low

E-way bill collections in May are at the lowest in a year.

Collections slipped to 3.8 crore in May 2021 as per data up to May 30, 2021 compared to 5.9 crore in the previous month. The contraction of 35% month-on-month in May follows a previous contraction of 17.5% month-on-month.

Truck Rentals

Truck rentals continued to fall, dropping by 6-8% for major routes in over the past month, after having fallen by 18-27% in April, according to data shared by the Indian Foundation of Transport Research and Training.

Truck rentals have slumped by 23% - 27% between April 2021 to now with fleet utilisation falling to to 35%- 40%, said SP Singh, senior fellow and coordinator at IFTRT.

Since return load on most of the 75 routes has four-to-seven days waiting period, this has brought down monthly gross revenue for fleet owners to less than half of levels seen in March 2021, he said, adding that truckers have also had to absorb the hike in variable input expenses, such as in fuel price.

Rail Freight: Holding Up

Rail freight, however, held steady and showed an uptick in May 2021, from the previous month. Tonnage in rail freight rose by 2.8% in May 2021, on a month-on-month basis, according to a statement by the Ministry of Railways.

Manufacturing PMI: 10-Month Low

The IHS Markit India Manufacturing Purchasing Managers’ Index stood at 50.8 in May 2021 compared with 55.5 in April, showing signs of stagnation in manufacturing activity.

The Indian manufacturing sector is showing increasing signs of strain as the Covid-19 crisis intensifies, said Pollyanna De Lima, economics associate director at IHS Markit. Key gauges of current sales, production and input buying weakened noticeably in May and pointed to the slowest rates of increase in ten months, she added.

Foreign Trade

While merchandise exports strengthened in May, imports fell. Exports rose by 5.2% month-on-month to $32.2 billion in May 2021 from $30.6 billion in April. Imports fell by 15.7% month-on-month to $38.53 billion from $45.7 billion in the same duration.

Non-oil imports in May 2021 were estimated at $29.08 billion compared to $34.85 last month, while non-oil non-gold imports were estimated at $26.14 billion compared to $28.61 billion in April.

Turning A Corner?

After localised lockdowns disrupted economic activity in varying degrees across the country, states that were the first to announce local lockdowns are now starting to ease restrictions as active Covid-19 infections dip.

Given the moderation in virus caseload, and partial easing of restrictions seen across many states, we expect some improvement in activity levels in June, said Rahul Bajoria, chief economist at Barclays, in a note dated June 1, 2021.

QuantEco’s Daily Activity and Recovery Tracker index posted its first material uptick in 12 weeks for the week ending May 30, 2021. The index rose by 4.8% on a weekly basis, after rising by 0.9% in the preceding week, a research note dated June 1, 2021 said. Having surpassed the pre-pandemic baseline of 100 in February-March 2021, the index had retraced by nearly 45% over April-May 2021 amidst the second wave.

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