Business Desk, ETV Bharat: The near-term outlook for the Indian economy looks highly uncertain as August economic data sends out mixed signals on extent of recovery.
A research report by the State Bank of India (SBI) titled “Three Months After Unlock” released on Thursday points out that although daily indicators reveal higher mobility and activity in the economy, some major indicators have lost momentum in August.
The SBI Business disruption index shows a pick-up in August compared with the previous month after peaking out in April, indicating a resumption in economic activities after the ‘Unlock’ process began.
Google mobility index also improved across all categories in August from July. Rail freight earnings increased during the month, while auto sales data also showed higher growth from a month ago.
Digital payments increased, with UPI transactions in both value and volume terms surpassing pre-Covid levels in August.
However, labour participation rate, RTO (regional transport office) transactions, weekly food arrivals have all declined in August compared with July.
“The decline in labour force participation rate is a matter of concern as it indicates a large percentage of labour is still wary of returning to work given the spread of pandemic,” the report said.
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Retail food prices also continue to increase in August compared with their pre-lockdown values. “Week arrival of food at mandis in August indicating supply-side disruptions across states continue to manifest in price increases. August could see increase in food prices,” the report added.
The rural economy in particular is starting to show signs of strain, with higher unemployment and falling MNREGS (Mahatma Gandhi National Rural Employment Guarantee Scheme) wages in August.
Data by economic think tank Centre for Monitoring Indian Economy (CMIE) showed that rural unemployment rate increased to 7.65% in August from 6.66% in July.
Also, the person-days of employment created under the scheme grew by a tepid 14% in August compared with a year ago after growing over 100% year-on-year in both June and July.
Analysts believe that such varied movement of key indicators hint at a prolonged recovery for the economy. Earlier this week, India’s official data showed that gross domestic product (GDP) grew -23.9% year-on-year in the April-June quarter due to the nationwide lockdown imposed on 25 March 2020.
Given the Q1 GDP data, real GDP for FY21 is expected to shrink by 10.9%, according to SBI research report. It had earlier estimated real GDP growth at -6.8% for the current fiscal.
