After recording a fast uptick in the first half of November, some high-frequency economic indicators reversed gains after the festival, shows Mint’s state recovery tracker
The Indian economy’s festival-driven economic recovery continued in early November but appeared to lose steam towards the second half of the month, shows Mint’s state recovery tracker. The recovery was possibly interrupted due to post-Diwali fears of a second covid wave in some states. The slowdown after mid-November was most evident in high-frequency indicators such as mobility and power demand.
Public mobility in the six largest state economies of India reached 84% of pre-pandemic levels by Diwali on 14 November, but scaled back to 79% in the next two weeks, Google data shows. These states—Maharashtra, Tamil Nadu, Uttar Pradesh, Karnataka, Gujarat, and West Bengal— matter the most in the recovery as they make up half of India’s economic output. The rest of India, which contributes the other half of GDP, recorded 81% of the normal footfalls at public places by November-end.
Public 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.
Barring a few states such as Karnataka and Kerala, the pace of economic recovery weakened in most large state economies. Mint’s state recovery 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).
Gujarat had the worst setback in terms of mobility after Diwali. The state had reached 88% of pre-pandemic level public movement by the festival, but is set to end November at levels worse than even September—nearly 70%. The state was one of those that enforced night curfews in its major cities in the last week of November, amid a fresh virus outbreak. Bihar and Uttar Pradesh were the only major states where mobility improved in the second half of the month.
Power demand increased at the slowest pace since September, data from the National Load Despatch Centre showed. In November, overall power demand was 3% higher than last year’s level. Interestingly, in the first half of the month, power demand was trending higher than the year-ago (8%) level but dropped below year-ago levels in the second half (-1%). Andhra Pradesh, West Bengal, Gujarat and Tamil Nadu saw sharp drops in their power demand in the second half of November compared to earlier weeks of the month.
The sharp drop in power consumption in Tamil Nadu and Andhra Pradesh in the second half pulled their overall consumption in the month below last year’s levels.
For the first time since April, mid- and small-sized state economies were not remarkably ahead of larger states on this count, with 2% higher power usage than the year-ago period.
The trends in vehicle registration varied widely across states. Around 1.8 million new vehicles were registered in November, the highest in seven months, shows data from the road transport ministry. But the deficit against the year-ago period remains large at (-) 21%.
Kerala and Delhi, despite their fresh coronavirus outbreaks in recent weeks, recorded the best vehicle sales figures relative to last year. Kerala recorded just a 3% year-on-year decline, and Delhi 4%. Vehicle registrations in Gujarat and Rajasthan are still around 43% and 29% lower compared to year-ago levels. Mid-sized state economies—Punjab, Haryana, Bihar and Odisha—registered 22% fewer vehicle registrations than November 2019.
GST collections in major states such as Maharashtra, Uttar Pradesh, Karnataka and Kerala fell below last year’s levels in November, having increased in October. Maharashtra collected 6% less GST than a year ago, and Kerala, 7%. Delhi’s collections also remained sharply below last year’s levels. Andhra Pradesh (12%), Gujarat (11%) and Tamil Nadu (10%) saw sharp improvements in GST collections, which pulled up overall collections.
The robust GST collections in some states partly reflect the festive effect. By October, public movement had largely resumed in most states, barring Maharashtra and Kerala. However, with most Diwali-related activity now out of the way, this has changed in a matter of two weeks. A district-wise analysis of Google data shows that across India, people are increasingly staying home once again. The national mobility picture looks more homogenous than ever in the last three months.
Indians experienced a good part of the coronavirus outbreak without major festivals. At a time when the spread of the virus began to slow down, festivals finally came into the picture. The aftermath brings warning signs. A lax approach to the pandemic can lead to flare-ups and harm rather than help the economic recovery.
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