India's economic activity, which began recovering after the lockdown was lifted in many parts of the country, is starting to lose steam as Covid-19 cases surge.
Nomura's India Business Resumption Index, which tracks business activity on a weekly basis, has averaged around 70 in July–almost 30 points lower than a normal scenario. Besides, the index which has started rebounding from a low of 45 in April appears to be ‘stuck', Nomura said in a weekly note.
Confirmed Covid-19 cases continued to mount with no signs of slowing as India's total tally crossed the 14-lakh mark on Monday. India now has the fastest-growing epidemic with new cases rising at over 20% since last week.
The rapid increase in cases could hamper economic recovery Nomura said. “With daily cases continuing to pick up both nationally and in traditionally safer states (the South and East), we expect increased risk aversion from the public and local governments to weigh on the pace of the economic recovery.”
Nomura said that mobility indices, which were flattening in June, have now begun to worsen. Google's workplace mobility data is now around 33 points below normal. Besides, the labour participation rate has ticked lower to 41.1% from 41.7% a week earlier. Unemployment rate, too, has risen 30 basis points to 8.2%.
Overall, Nomura said, this could mean that there is heightened risk that improvement in activity may fade away after the initial post-lockdown normalisation.
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