This Key Logistics Indicator Improved Further In July

A rebound in economic activity in May and June has been followed by a plateauing of some indicators such as the purchasing managers index. However, one indicator of logistics activity across the country suggests that movement of goods continued to improve in July.

E-way bill collections for the month of July were 7.3% below the levels seen a year ago, shows data published by the Goods and Services Network. This is an improvement over the 12.7% year-on-year contraction reported in June.

• Intra-state e-way bill collections in July were 3.9% below last year, compared to a 7.9% year-on-year drop in June.
• Inter- state collections, that had seen a harder hit amid the lockdown, contracted by 12.3% year-on-year in July, after having fallen 19.9% in June.

On a month-on month basis, intra state e-way bill collections rose by 9.1% in July 2020, while inter- state collections saw a pick-up of 15.3%. 

E-way bill collections may have improved as there is some stocking-up happening, especially for essential commodities, though discretionary demand remains at bay, said Sameer Narang, chief economist at Bank of Baroda. E- way bill collections have also picked up as the country and states unlock, said Narang. Critically, the manufacturing industry has seen a quicker rebound relative to services, he said.

Overall manufacturing activity remains in contraction zone, as indicated by the Markit India Manufacturing PMI which dipped to 46 in July from 47.2 in June. However, some industries such as automobiles reported stronger sales last month.

Consumer confidence remains low and economic uncertainty persists, said Narang, adding that the broader economy continues to contract even if at a decelerating pace. In such a scenario, there will be indicators that will plateau even as others grow, until the entire economy can open up, he said.

Madan Sabnavis, chief economist at CARE ratings, said that fewer restrictions on movement of goods may have led to improvement in e-way bill collections. But, they are unlikely to return to pre-covid levels. For that to happen, consumer and producer demand would have to return, along with improvement in several other factors such as availability of migrant labor and an improvement in small business activity, among others.