Economic recovery had some obstacles in Feb, shows Mint tracker

The aviation sector recovered slowly in February, carrying 7.7 mn passengers, an increase of 20% from a month earlier. (Photo: HT)
The aviation sector recovered slowly in February, carrying 7.7 mn passengers, an increase of 20% from a month earlier. (Photo: HT)

Summary

Half of the 16 high-frequency indicators considered in the tracker were in the red, and only three were in the green last month. Five were in the amber zone, in line with its five-year average trend

NEW DELHI : After staying resilient in the face of the pandemic’s third wave, the Indian economy appears to have struggled again in February, according to the latest update to Mint’s monthly macro tracker. Half of the 16 high-frequency indicators considered in the tracker were in the red, and only three were in the green last month. Five were in the amber zone, in line with its five-year average trend.

Launched in October 2018, Mint’s macro tracker provides a comprehensive monthly report on the state of the economy, based on trends in 16 high-frequency indicators across four segments: consumer economy, producer economy, external sector, and ease of living. Its colour-coding—red, green and amber—is based on the performance relative to the five-year average trend. In January, six indicators had been in the red and four in green.

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In a 1 March note to clients, brokerage Nomura noted that India’s broad growth outlook remained largely lacklustre. The ‘steady state’ growth rate risks underperforming once the volatility in data from the third wave subsides, it said.

The consumer economy segment performed similar to January, with three indicators in the red and only one in line with its five-year average. Despite the relaxation of localized restrictions post the pandemic’s third wave, the domestic aviation sector recovered slowly in February, carrying 7.7 million passengers, an increase of 20% from a month earlier.

The auto sector is gradually making a comeback. Domestic passenger cars had their best sales since April when the semiconductor supply shortage hit the industry. However, tractor firms reported their worst sales performance in nearly two years.

The producer economy had two indicators in green and amber for the third month in a row. Despite a slight improvement since January, business confidence among services firms remained subdued due to pandemic-related uncertainty and inflationary pressures. Still, the Purchasing Managers’ Index increased in February from 53.0 to 53.5. Rail freight traffic, which accounts for most of the Indian Railways’ revenue, fell in February but remained above the five-year average.

While both exports and imports grew in February, export growth was not strong enough to offset the import surge. Hence, the trade deficit widened further, primarily driven by a sharp rise in oil imports and higher core imports as the economy recovered from the third wave. Exports in labour-intensive sectors declined marginally in February. The decline in the rupee in February—prompted by the Ukraine war—also put the forex indicator of the tracker in the red after a month’s gap.

In February, the ease of living section continued to be the poorest performer among all segments. Retail inflation accelerated slightly, although it was the lowest in three months compared to two years ago. Economists at Barclays expect the spike in global commodity prices to push inflation above the central bank’s target in the coming few months. Core inflation, which excludes energy and food, remained close to the upper band of the Reserve Bank of India’s inflation target. The labour participation rate, as measured by a Centre for Monitoring Indian Economy (CMIE) survey, was at 39.9%, the same as in January.

Although the threat of a pandemic is receding, the Indian economy is expected to face impacts from rising commodity prices, supply-chain disruptions, and a slowdown in global growth in the near term. However, the supportive fiscal and monetary policy will encourage growth recovery.

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