Led by Tamil Nadu and West Bengal, India’s largest state economies saw significant progress on key indicators in September, Mint’s State Recovery Tracker shows
Until recently, economic revival in India was mostly limited to smaller states. The lingering impact of the pandemic was still felt in larger, richer states. But that trend is now reversing. The top states are now catching up with the rest of India in getting back on track, shows Mint’s latest State Recovery Tracker.
Six states make up half of India’s economic output, and will matter the most in economic recovery: Maharashtra, Tamil Nadu, Uttar Pradesh, Karnataka, Gujarat, and West Bengal. In September, workplaces in these states recorded 69% of their normal footfalls, shows Google data. This is the highest since the lockdown began in March. The rest of India recorded 78% of the normal footfalls at workplaces, the worst level since May, as cases spread faster in the smaller states.
Workplace mobility 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).
Across all four indicators, large state economies fared better in September than before. The improvement in economic activity has followed improvements in case-load, albeit with a slight lag. The top six state economies accounted for more than two-thirds of all reported infections in May but now account for about 54% of all reported cases. Other states, meanwhile, saw a late surge in cases, forcing them to curtail economic activity through local restrictions.
Small-sized state economies in the tracker saw the greatest drop in workplace mobility—from 83% of normal footfalls in August to 72% last month. Tamil Nadu, West Bengal and Delhi gained on this indicator. Google data for mobility at other public places, such as recreation spots, parks, and shops, was not available for September. Google said it is “working to resume updates as soon as possible".
For the first time in six months, electricity consumption exceeded the year-ago level (by 5%) in September, data from the National Load Despatch Centre showed. Madhya Pradesh and Uttar Pradesh led the way, consuming 23% and 19% more power compared to year-ago levels. Karnataka was the furthest behind, with a 12% year-on-year drop. On average, mid- and small-sized state economies fared better than larger states on this count, with 5% higher power usage than the year-ago period.
Around 1.34 million new vehicles were registered in September, 11% lower than year-ago numbers but the highest in six months, shows data from the road transport ministry. The top six states performed slightly better (10% drop) than the rest of India (12%). Several states, most notably Tamil Nadu (17% increase), even exceeded the year-ago numbers. On average, mid-sized states were 18% behind the year-ago vehicle registration numbers, and small-sized ones 6%.
Seven of the 12 largest state economies improved on goods and services tax collections as well. Until August, collections in most states were in the negative zone. Rajasthan saw the biggest year-on-year gains in September (18%), followed by Tamil Nadu (15%) and Kerala (11%).
Where are Indian states headed in the coming weeks? A district-wise analysis of Google mobility data gives further insights about how economic activity is placed in different parts of the country. People in peninsular India are the most cautious and are less likely to step out of homes as compared to other parts of the country. This phenomenon is most pronounced in Maharashtra, India’s worst hit state, and Kerala, which struggled with the spreading pandemic in September. In Chhattisgarh too, increasing virus load has kept people at home. North-eastern states, which had so far performed well, also showed a decline in mobility in September as the virus spread picked up pace.
India now has over 100,000 covid-related deaths, and there have been no sustained signs of a let-up so far. Yet, September was the first month with positive hints of an economic recovery. Growing activity despite the pandemic shows the restrictions may simply have worn Indians out by now. As the economy crawls back to life, precautions against the virus will be key to keep the engine moving.