“Economic activity resurfaced to a post-COVID peak last week”
Economic activity in India hit a new post-pandemic high last week, according to the Nomura India Business Recovery Index, with most indicators showing improvements even as demand for electricity fell from the previous week.
The index hit a record high of 108.8 for the week ended Oct. 17, up from 105 in the previous period, Nomura said in a statement. A reading of 100 on the index, which uses February 23, 2020 as a base, relates to the level of economic activity before the pandemic.
As the level of mobility increased sharply and the rate of participation in the labor market increased from 40.4% to 41.6%, the demand for electricity fell by 1.7% after an increase of 0, 3% the week before, wrote Nomura research economists Sonal Varma and Aurodeep Nandi in a note on the index’s last read.
Economists, however, have voiced concerns about supply-side risks, including the coal and power situation in India. Last week, Nomura warned that if power outages were to become widespread, industrial production could suffer.
“Even as demand picks up, supply bottlenecks have become a bigger constraint. Coal shortages are causing supply interruptions for customers without electricity, while shortages of woodchips have hurt passenger vehicle sales during the holiday season. While supply struggles to keep up with demand, we see higher inflation as a greater risk, ”they noted.
With domestic flights allowed to operate at full capacity from Monday, the transport sector would benefit from a new boost, Nomura economists said. Although the pace of vaccination slackened in October, India is reportedly crossing the milestone of administering one billion doses of the vaccine this week, they noted. The vaccination coverage allowed the reopening and had boosted mobility.
The Nomura India Business Recovery Index is also based on the seven-day moving average of Google and Apple mobility data, electricity demand figures and labor force participation rate, as well as ‘other indicators.