As more states are imposing lockdown-like curbs, while others have extended restrictions on mobility, sequential economic growth is hampered, according to Nomura.The Nomura India Business Resumption Index (NIBRI) fell to 64.5 for the week ended 9 May from 69.7 the prior week (that is, 35.5 percentage points (pp) below pre-pandemic levels). The index is now at levels last seen in mid-June, after having fully recovered in February. The index tracks a weekly dashboard to capture a host of ultra high-frequency data.
We would, however, caution that the drop in mobility exaggerates the hit to economic activity. International experiences suggest the correlation between mobility and gross domestic product (GDP) growth is much weaker during the second wave, due to more targeted restrictions and more pandemic-adept consumers and businesses,” said Sonal Varma and Aurodeep Nandi, economists, Nomura.
The fall in business activity continues to be driven by a sharp fall in mobility. Googles workplace and retail and recreation mobility indices fell by 10 pp from the prior week, while the Apple driving index fell by 8 pp. Power demand also fell by 4.1% week-on-week, although the labour participation rate inched higher to 41.3% versus 38.9% last week.
Nomura has already lowered GDP growth forecast for 2021 to 9.8% year-on-year from 11.5% (FY22: 10.8% from 12.6%), reflecting a larger lockdown-led loss of sequential momentum in Q2. It expects a localized hit in second quarter and believes that medium-term tailwinds (vaccine pivot, global recovery, easy financial conditions) remain intact.
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The Nomura India Business Resumption Index fell to 64.5 for the week ended 9 May from 69.7 the prior week.It is 35.5 percentage points below pre-pandemic levels