The early impact of the virus is still weighing down larger state economies, and holding back the economic momentum in the country
By late June, India’s coronavirus outbreak had started shifting base from the richer, urban states to smaller ones. But two months on, this new pandemic trend is at odds with India’s economic revival story. All states are indeed recovering, but the pace is slow for the states that matter the most, shows Mint’s State Recovery Tracker.
Six states make up half of India’s economic output: Maharashtra, Tamil Nadu, Uttar Pradesh, Karnataka, Gujarat, and West Bengal. Their share in the national virus case-load reduced to 52% in August, from a high of 69% in May. But public movement is still just 65% of normal levels in these states, as compared to 79% in the rest of India, shows Google data.
This shows that despite the improving pandemic situation, residents in large states are being cautious.
Public movement is one of the high-frequency indicators in the recovery tracker. Three other indicators, which serve as proxies for economic activity—electricity consumption, goods and services tax (GST) collections, and vehicle sales—are also considered in the tracker. The tracker looks at the 12 largest state economies individually (each having at least 4% share in India’s gross domestic product or GDP), and clubs mid-sized economies (2–4% of India’s GDP) and small ones (1–2% of India’s GDP).
So far, economic recovery and pandemic containment had moved in tandem across states. That link broke down in August. This is worrying for two reasons. One, the larger state economies hold the key to a nation-wide economic revival and if economic activity and sentiments are still tepid, it bodes ill for the future. Secondly, if rising cases are not deterring mobility in smaller states, it is possible that the caseload and the death toll may worsen in these states in the coming weeks.
Mid- and small-sized state economies consumed nearly as much electricity in August as in the year-ago period, data from the National Load Despatch Centre showed. Among large states, Rajasthan, Madhya Pradesh and Uttar Pradesh exceeded last year’s figures. Most other states narrowed the gap with the year-ago level in August.
The national electricity consumption has improved manifold since the first lockdown, but remains lower than 2019. In August, it was 3% lower year-on-year. This deficit is marginally higher than in July.
Around 1.13 million new vehicles were registered in August, 31% lower than year-ago numbers, shows data from the road transport ministry. This marks an improvement from July. Mid-sized states were able to match 70% of the year-ago vehicle registration numbers, and small-sized ones climbed up to 80% (registering a year-on-year decline of 20%). Larger state economies such as Uttar Pradesh, Karnataka, and Gujarat are far behind.
Kerala was among the better performers on goods and services tax collections in July. But as the pandemic spread, the state posted the worst decline in August. Its GST mop-up was 22% lower than in August 2019. Mid- and small-sized states recovered much of their lost ground, but Maharashtra, Tamil Nadu and Delhi are still struggling.
With easing local lockdowns, public movement improved in most states in August—even where virus cases grew fast. Nationally, public mobility was about 67% of the par level in the last week of August, up from 61% at July-end. The biggest rise was observed in Chhattisgarh and Bihar, two states that struggled with the pandemic. These two states lifted most lockdown orders in August.
Mobility refers to Google data on footfalls at groceries and pharmacies, workplaces, parks, transit hubs, and retail and recreation spots. The comparison has been made with the baseline period of 3 January to 6 February, 2020. The data has been a useful indicator of activity in public places throughout the pandemic.
Punjab, where the pandemic has been steady in its spread, was one of the few states where mobility declined. By August-end, it stood at 63% of the normal level. Maharashtra and Delhi lag the most, possibly due to the harsh impact of the virus early on, and higher work-from-home capability in urban centres.
India’s GDP shrank to a historic low of 23.9% in the June-ended quarter. The coming quarters will likely show improved numbers but it is not clear yet how fast the economy will recover. Two crucial factors are likely to determine that pace: how soon the large state economies reignite their growth engines, and how effectively the smaller states handle the pandemic.