Latest wave had muted impact on growth, India’s business activity back to pre-third wave level

Mumbai, February 14

The last week saw a pick-up in business activity to the pre-third Covid-19 wave levels, a Japanese brokerage said on Monday.

The Nomura India Business Resumption Index, a weekly measure of activity in comparison to the pre-pandemic level, rose to 119.5 for the week ended February 13 from 114.2 in the prior week, which is a 19.5 percentage points (pp) above pre-pandemic levels.

“This is a 17.7pp recovery in the NIBRI from its nadir and almost fully compensates for the third wave losses,” the Japanese brokerage said.

It said mobility indicators are returning to pre-third wave levels, pointing out that Google workplace and retail and recreation mobility rose by 5.6 pp and 7.9 pp, respectively, while the Apple driving index rose by 18 pp.

The labour participation rate inched lower to 40.3 per cent from 40.5 per cent in the previous week, while power demand fell by 1.5 per cent week on week as payback from the preceding week’s 13.3 per cent rise, it said.

Trends in ultra-high frequency data suggest a more muted impact of the third wave on growth overall, the impact is concentrated among contact-intensive services, and is not broad-based; and growth is likely bottomed at end-January and appears set to rebound in February, the brokerage said.

The muted impact on growth suggests there is an upside risk to its 3.2 per cent growth forecast for the March quarter, the brokerage said, adding growth tailwinds include higher public capex (capital expenditure), easy monetary conditions and services normalisation.

Tighter global financial conditions, worsening terms of trade, scarring effects on low income households and higher inflation are the negatives from a medium-term perspective, it added.