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After months of erratic economic performance, India’s economic momentum had picked up pace last February, only to be stopped on its tracks by a global pandemic. The story so far this year bears an eerie resemblance to last year. Mint’s macro tracker shows a steady improvement in economic indicators over the past few months but a renewed surge in infections once again poses a threat to economic activity and investor sentiments.

Of the 16 high frequency indicators considered in the tracker, 7 were in the green, or above their five-year-average growth trend in February, the latest update shows. 5 were in the red, or below their five-year-average growth trend. 4 maintained the trend.


Launched in October 2018, Mint’s macro tracker provides a monthly state-of-the-economy report based on trends in 16 high-frequency indicators across four segments: consumer economy, producer economy, external sector, and ease of living. The scorecard saw its worst reading in April 2020, when the wheels of the economy grind to a halt because of a nation-wide lockdown.

Since then, the economic momentum has seen a gradual improvement before moving on to the fast lane over the past couple of months.

Even the lacklustre consumer economy segment has seen an uptick. After seeing a decline in January, sales of passenger vehicles rose 4.4% over the year-ago period. Tractor sales continued to see robust growth, at 31%. The other two indicators of consumer economy--broadband subscriber base and domestic air passengers--remained below their five-year-average trends.

In the producer economy segment, one indicator, credit growth, continued to disappoint, registering below-average growth in February once again. Other indicators were either in the green or flashing amber. Core sector growth figures for January were in the amber category, registering barely positive growth.

The composite purchasing managers’ index (PMI), a composite measure of activity in manufacturing and services sectors continued to see improvement, rising to its highest levels in the post-pandemic phase at 57.30. A reading above 50 on the index indicates month-on-month expansion in business activity. Rail freight traffic also remained in positive territory in February, although growth was a tad lower than in January.

Despite a faster rebound in global trade, India’s exports have lacked momentum so far. After growing at 6% in January, exports once again declined, by 0.8% in February, latest data from directorate general of commercial intelligence & statistics shows. Labour intensive sectors, such as leather products, handicrafts, and gems and jewellery, fared far worse, declining over 8% year-on-year. Lack-lustre exports has added to the stress in the pandemic-ravaged labour market.

The ease of living segment of the macro tracker worsened over the last month. After easing in January, CPI inflation rose again in February, flashing red. Core inflation that has been above 5%-mark for the past several months rose further, to 5.6% in February. Fears of a resurgence in inflation have been gaining ground globally in recent weeks. In Asia, inflation is not a big worry for most economies, a Moody’s Analytics report dated 30 March said. But India and the Philippines are outliers in Asia, with troublingly high inflation, the report said.

Persistent inflationary pressures pose a challenge to India’s monetary authorities who have maintained an easy money policy since the pandemic began. The growing threat of inflation amid rising economic activity and growing public debt had led to murmurs about the need to tighten monetary policy in India. The rising yields in developed markets added to such concerns.

But given the fragile nature of the recovery, and the threat to that recovery from the second wave of infections, the monetary policy committee (MPC) which meets next week, may well decide to keep policy rates unchanged.

Inaction on policy rates won’t hurt us at the moment. But inaction in curbing covid-19 cases will take a heavy toll on the economy. Already localized lockdowns have made a come-back, hurting mobility. If mobility restrictions rise further, the economic momentum will be dented severely.

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