The onset of the third COVID-19 wave in the country has dragged down economic activity by about 20% in less than a month, as per a Nomura index tracking resumption of business operations since the pandemic started.
The Nomura India Business Resumption Index fell to 100.5 for the week ended January 23, from 102.2 in the preceding week, only approximately 0.5% above pre-pandemic levels, the firm said in a note on Monday.
A reading of 100 on the index indicates activity levels before the pandemic hit the economy in early 2020. This is the fourth successive week of moderation in the index, which had peaked at 120.2 in the week ended December 26, and signals a slowdown in the economy in tandem with the rise in COVID-19 cases ahead of the Union Budget for 2022-23 to be presented next week. Nomura recently cut its India GDP growth forecast for 2021-22 to 8.7% from 9.2%. “We expect the upcoming Budget... to prioritise growth, with directional fiscal consolidation to 6.4% of GDP in 2022—23 from 6.8% of GDP expected in 2021-22,” Nomura research analysts Sonal Varma and Aurodeep Nandi noted.
Economic data are mixed: air traffic continues to fall steeply (-36% from December peak), but railway passenger revenues have stabilised and freight revenues remain robust. As cases stabilise, activity should improve in February/March,” the economists observed.
New daily COVID-19 cases have exceeded 3,00,000, up from about 2,50,000 last week, but the rate of increase has moderated and a few States, including Bengal and Delhi, are reporting lower cases while death rates remain stable, they added.
Although power demand increased by nearly 5% in the week ending January 23, from a week ago, workplace mobility fell 10.7% as per Google data. The Apple driving index, another metric for measuring mobility, was up a mere 1.7% in the week after a ‘massive fall of about 84% over the past two weeks, they added.