Early signs of economic recovery fading, says RBI

In its annual report for 2019-20, the central bank noted that the upticks which became visible in May and June after the lockdown was eased appear to have lost strength in July and August.

Business Desk, ETV Bharat: After facing major economic downturn earlier this year due the sudden outbreak of the coronavirus pandemic, the Indian economy was hoping to bounce back as certain key economic indicators started showing signs of improvement. However, confirming fears of a pullback, the Reserve Bank of India (RBI) on Tuesday said that the recent revival may be short-lived.

“The upticks that became visible in May and June after the lockdown was eased in several parts of the country appear to have lost strength in July and August, mainly due to re-imposition or stricter imposition of lockdowns, suggesting that contraction in economic activity will likely prolong into Q2,” RBI said in its Annual Report for 2019-20.

The total e-way bills issuance, an indicator of domestic trading activity, increased by 70.3% in June 2020 on a month-on-month (m-o-m) basis; in July, however, it increased by only 11.4% m-o-m and remained 7.3% lower than a year ago, the central bank noted.

“During June 2020, inter-state e-way bills had increased by 91.3%, but in July they rose only by 15.3%. Similarly, intrastate e-way bills, which had risen by 60.1% (m-o-m) in June, increased only by 9.1% in July,” the report added.

RBI also noted that the Google mobility trend, which tracks movement of people as a reflection of underlying economic activity, picked up in June 2020 from its levels in April and May. However, in July, moderation set in, with retail and recreation mobility stagnant, and some slide in people’s movement around groceries and pharmacies.

Earlier this week, former RBI governor D. Subbarao also called cautioned the government against the “misleading” signs emerging in the economy. “I don't believe we should read too much into the green shoots... what we’ve been seeing is just a mechanical rebound from the depressed base of the lockdown; it will be misleading to see it as a signal of a durable recovery,” Subbarao told PTI.

“In the medium term, India’s financial problems could only get worse,” he added.

Meanwhile, India is set to release its estimates of GDP growth for Q1 of 2020-21 on 31 August, which might throw some light on the extent of the damage seen by the economy.