Economic impact of the second wave could intensify in coming weeks, particularly through the mobility route, with the downside risk of spreading to the wider economy, even as power demand and labour participation rate so far remain largely unaffected
Mumbai: Stricter restrictions imposed by states to check the spread of covid-19 has hurt mobility in the country, and could deepen the economic impact of the second wave in the coming weeks, according to analysts at Nomura.
Nomura India Business Resumption Index (NIBRI) shows mobility is hit, while power demand and labour participation rate so far remain largely unaffected. As of 18 April, the index has further plummeted to over 16 percentage points below pre-pandemic normal from 12 percentage points in the previous week. The index tracks a weekly dashboard to capture a host of ultra high-frequency data.
“A key reason behind the fall in NIBRI is a deterioration in mobility indicators in response to the restrictions and cautious consumer behaviour," said Sonal Varma and Aurodeep Nandi, economists, Nomura.
According to them, economic impact of the second wave could intensify in coming weeks, particularly through the mobility route, with the downside risk of spreading to the wider economy.
“While lockdown stringency has not increased since last week, this may be temporary, as states could impose stricter restrictions in response to the burdening of hospital infrastructure," said Varma and Nandi. However, they believe the impact of the second wave on the economy remains far more benign than the first wave, although data suggests clear signs of sequential moderation in April.
According to Varma and Nandi, the economic impact will be short-term and less severe than in second quarter of 2020, due to a more pandemic-adept economy. “Overall, we expect a loss of sequential momentum in Q2 2021, but once the second wave passes (we assume July-September), it should result in a release of pent-up demand in the subsequent quarters," they added.
Google retail & recreation and workplace mobility indicators have fallen by 1.3 pp and 3.6 pp from the previous week, respectively , while the Apple driving index has dropped by a significant 19pp, particularly in the cities of Maharashtra (Mumbai and Pune). The Traffic Congestion Index (TCI) has also fallen further to 7.5 as of 18 April compared to 10 as of 13 April, and down from 16 a month earlier, although above the levels a year earlier.
As of 18 April, daily railway passenger revenues dropped by an average of 25% from a month ago, as individuals cut back on their travel plans, although this is better than last April, when revenues dipped to zero. GST E-Way Bill collections declined by 38% for the first two weeks of April as compared with the corresponding period in February-March reflecting less movement of goods both intra-state and inter-state.