India’s High-Frequency Indicators Plateau After A Spurt

After a quick rebound in economic activity starting October, several high-frequency indicators have plateaued in the last four-to-six weeks. The flattening of economic momentum comes alongside rise in new cases in some states, most notably Maharashtra and Kerala.

Economic momentum seems to be getting weaker though leading indicators point to a continued recovery, Saugata Bhattacharya, chief economist at Axis Bank, said in a March 1 report. The beginning of a second wave is visible in India, but case increments so far are concentrated in a few districts, Bhattacharya added.

The Nomura India Business Resumption Index eased to 98.5 as on Feb. 28 from 99.3 a week earlier. Activity is now about 1.5 percentage points below pre-pandemic levels as as a rise in cases in a few states impacted mobility, posing a near-term risk, Nomura said. Aditi Nayar, principal economist at ICRA Ltd. also said the Indian economic recovery appears to have entered into a consolidation phase in January 2021, with a varied performance across the early economic indicators.

Manufacturing PMI

The IHS Markit India Manufacturing Purchasing Managers' Index stood at 57.5 in February, close to a figure of 57.7 in January, according to data released on Monday. The index of eight core industries, another indicator of manufacturing activity, rose 0.1% in January, similar to a growth of 0.2% in December.

With manufacturing PMI for the month of February at ‘cruising altitude', a fast nationwide vaccine rollout could provide a further boost to activity normalisation, said Rahul Bajoria, chief India economist at Barclays. The government's vaccination rollout has started slowly, undershooting our estimates amid lower-than-expected turnout. Still, India appears set to launch its second phase of vaccinations, which should see an increase in vaccine distribution, Bajoria said.

E-way Bill Collections

E-way bill collections rose 11.6% over a year ago in February 2021, and by 1.5% compared to a month ago.

Collections were at a record high of 6.42 crore in December 2020 but have plateaued since. E-way bill numbers indicate flattening of manufacturing and trading activity, Bhattacharya said.

Foreign Trade

Preliminary merchandise data for February 2021 showed a slight decline in imports while exports remained stable.

Exports saw a modest decline of 0.25% on an annual basis in February 2021, compared with a growth of 6.2% in January. Petroleum remained a drag on exports, with non-petroleum exports rising 3.5%. Imports rose 7% over a year earlier compared with a 2% increase in the previous month. Non-oil non-gold imports, an indicator of domestic demand, rose 7.4% over a year ago.

GST

GST revenue for January, collected in the month of February, exceeded the one-lakh crore mark for the fifth straight month. GST collections in February were Rs 1.13 lakh crore. While revenue for the month of February was 7% higher on an annual basis, it was 5.6% lower than in the previous month when GST collections were at a record high of Rs 1.2 lakh crore.

Google Mobility

The Google Mobility Tracker, which looks at movement across different categories, however, saw a pick-up in mobility across places.

Mobility trends for workplaces were lower by 16% between Jan 15- Feb 26 compared to the pre-pandemic baseline. Mobility trends for places of retail, recreation and supermarkets also saw a pickup compared to levels seen in the past few months.

As some states saw a spike in new cases of covid-19, divergences across states widened further. Among key states Maharashtra, Delhi, Karnataka, Odisha and West Bengal continued to see lower mobility in comparison to national averages, while Gujarat, Tamil Nadu and Uttar Pradesh saw relatively more mobility.

Electricity Demand

Demand for electricity during evening peak hours rose by over 5% for the third straight month in February 2021, over a year ago. Demand rose by 5.05% in February after rising by 5.7% in December and in January, according to data collated from daily reports published by the Power System Operation Corporation. The modest easing in demand in February was led by a decline in demand in Delhi, Maharashtra, Madhya Pradesh and Karnataka among major states.