Engines of economy roar back to life in states
3 min read . Updated: 08 Sep 2021, 12:36 AM IST
PremiumThe country ended the month of August with public mobility rising to almost pre-covid levels for the first time. This reflects in strong signals of economic recovery across the biggest GDP-driving states, shows the latest update to Mint’s state recovery tracker
The Indian economy gained further momentum in August as public mobility almost regained pre-covid levels ahead of the festival season. Early data such as the GST mop-up and the purchasing managers’ index (PMI) continued to give robust readings. This showed in state-wise trends as well, with large states such as Maharashtra, Tamil Nadu and Uttar Pradesh reporting significant uptick in Mint’s latest state recovery tracker.
Electricity consumption, one of the indicators in the tracker, reported its fastest annual increase since the pandemic struck. Vehicle sales are tiptoeing towards normalcy, though still remain behind pre-covid levels. Maharashtra, the biggest GDP contributor, was one of the leaders on both indicators. Uttar Pradesh, where mobility now exceeds the pre-pandemic baseline, also saw electricity consumption grow but vehicle sales were weak.
Gujarat and Rajasthan witnessed the fastest rise in power demand. Kerala posted the best vehicle sales growth in August, defying its high and relentless covid-19 caseload. In most other states, recovery trends coincided with a sharp dip in infections and a growing vaccination coverage. As in July, Delhi was a laggard again, with mobility still at 82% of normal levels, and recovery in electricity use and vehicle sales staying muted.
Mint’s state recovery tracker looks at three high-frequency economic indicators—electricity use, vehicle sales, and mobility levels—to keep track of the performance of the largest state economies (those with at least 4% share in India’s gross domestic product or GDP). Mid-sized economies (2-4% of India’s GDP) and small ones (1-2% of India’s GDP) are aggregated for this analysis.
Momentum improves
Barring Kerala, the covid-19 caseload continued its downward slide in August. The number of active cases, or the patients under treatment at a given time, declined 8% in the month. Four large states—Uttar Pradesh, Gujarat, Rajasthan and Madhya Pradesh—now report fewer than one new case per million population in a day. There was impressive progress on the vaccination front in August, with India twice crossing 10 million doses in a single day.
This has fuelled the swift economic turnaround since the lows of May. India consumed 130 billion units of electricity in August, an annualized 6.6% higher than the two-year-ago period. This was the second consecutive month of growth. Gujarat and Rajasthan recorded a 13% annualized rise over the period. Delhi was the only major state to report a slump, taking the bottom spot with a 1.3% decline in power consumption compared to pre-pandemic levels.
In mid- and small-sized states, electricity consumption was close to the national average.
Meanwhile, 1.39 million vehicles were registered across India in August, a drop of 11% since July, data from the government’s Vahan dashboard shows. The number is 7.7% lower than August 2019 on an annualized basis.
Only two states managed to post a growth in vehicle sales during this period: Kerala (9.8%) and Maharashtra (6.5%). Sales declined the most in Uttar Pradesh (15.1% drop), followed by Gujarat (12.5% drop). While medium-sized states trailed their larger counterparts, small states covered in the tracker performed better on this parameter.
Mobility returns
Mobility data recorded by Google through smartphone users has been a key leading indicator for economic activity throughout the pandemic. By August-end, public spaces in India were recording 98% of the footfalls that they used to before the pandemic, marking a monthly rise of seven percentage points.
The mobility recovery after the second wave has been far quicker than it was after the first wave. For the first time, six of the 12 biggest state economies recorded above-par mobility levels, with Uttar Pradesh furthest ahead (109% of normal), followed by Tamil Nadu (105%) and Andhra Pradesh (104%). Mid- and small-sized states also recorded above-par mobility.
However, a relatively higher virus caseload is restricting movement in parts of north-eastern states. Public places in Mizoram had just 65% of the pre-pandemic footfalls. Mobility also remained restricted in some urban pockets of Maharashtra, especially Pune, Thane and Mumbai districts.
In August, the six largest state economies—Maharashtra, Tamil Nadu, Uttar Pradesh, Gujarat, Karnataka and West Bengal—nearly mirrored the overall national performance on the tracker. This bodes well for national recovery since these six states make up 50% of India’s economic output. Last year, these six states had lagged the national figures for several months, and this weighed on recovery.
The growing momentum is expected to only improve as the festival season whips up demand in coming weeks. A vastly improved vaccination pace has also raised hopes of a better fight against any possible third wave. However, regional disparities in vaccinations will be a key pain point to address if consumption recovery has to be broad-based.
