Both mobility and non-mobility sectors of the Indian economy were reflecting the impact of the second wave of Covid-19 and the ensuing lockdowns as business activity continued to plunge further in May, said Japanese brokerage Nomura.
The Nomura India Business Resumption Index (NIBRI) fell to 60 for the week ended May 23, down from 63 a week earlier.
This reflected a severe drop in the index, which tracks high-frequency economic indicators such as mobility, power demand and unemployment, to levels seen in June last year after a full recovery in February, Nomura said in a note on Monday.
“The continued steep fall in NIBRI supports our view that the worst hit to activity will occur in May,” said Nomura economists Sonal Varma and Aurodeep Nandi, in the note titled, ‘Pandemic recovery at the cost of business resumption’.
While Google’s workplace and retail and recreation mobility indices fell by about 6 percentage points (pp) over the week, the Apple driving index bottomed and rose by 3.4pp.
Similarly, power demand continued its weekly contraction at -5% while the labour participation rate dropped 39.4% from 40.5% a week ago.
India’s unemployment rate was nearing its one-year high as it climbed to 14.7% from 14.4% in the previous week, the note said.
The various state-wide lockdowns and restrictions appear likely to spillover into June, but a few states have announced a gradual rollback of restrictions as their virus caseloads fall, suggesting a sequential improvement in activity in June, it said.
Fresh daily cases of Covid-19 fell to 222,315 in the last 24 hours, the lowest since April 15, even as India’s death toll crossed the 300,000 mark with 4,454 deaths over the previous day.
“For a sustained recovery, the pace of vaccination also needs to pick up, which we expect to happen after June,” Nomura said.
Daily vaccinations fell substantially to 942,722 over the last 24 hours, down from a daily average of over 3 million in April, as the country faced a severe vaccine shortage forcing states to temporarily shut vaccination drives for 18-44 age groups.
Nomura said the second wave’s impact to growth would remain localised to the April-June quarter with a projected 3.8% hit to gross domestic product on quarterly basis while it maintained the FY22 forecast at 10.8%.