India's economic recovery is gaining momentum, Nomura data shows

High frequency data in September showed that the recovery was gaining pace. The Nomura India Business Resumption Index (NIBRI) came in at 82.3 for the week ending September 20 from 81.2 a week earlier, recording the second consecutive week of a fresh post-lockdown high.
The surge in the figure was driven by a continued rise in mobility as evidenced by the Google retail and recreation mobility index and the Apple driving index even as workplace mobility worsened, Nomura said in a report on Monday.

The data suggested rising lockdown fatigue as consumers were increasingly stepping out for shopping and recreational purposes while disregarding pandemic concerns, the Japanese brokerage said.

“The mobility-driven surge in the NIBRI suggests lockdown fatigue is causing consumers to disregard pandemic concerns,” it said.

The NIBRI, which tracks business activity through high frequency indicators like mobility, power consumption and employment, showed a consistent pickup over August and September after stagnating at the 70 mark in July.

From 79 reported for the week ended September 6, the index surged 3.3 percentage points till last week. However, the recovery was undermined by a rising number of Covid cases and weak labour markets, the report said.

“The strong momentum masks weak labour markets and a worsening pandemic. Risks of a momentum reversal remain elevated,” it said.

While unemployment improved to 6.4% from 7% during the previous week, labour force participation worsened marginally to 40.4% from 40.7% over the same period.

Similarly, power demand growth tapered off slightly to -0.25% after recording a strong average weekly growth of about 3.3% over the previous three weeks.

“Nevertheless, rising COVID-19 cases and weak labour markets undermine the durability of the recovery, and broader sectoral growth indicators may remain weak,” the note said.

The note projected India’s growth for the ongoing calendar year at -9% while stating that growth was expected to slow down sequentially after an initial rebound.

Following the release of official data which showed growth contracted 23.9% in the April-June quarter on August 31, Nomura revised its estimate for FY21 growth to -10.8% from -6.1% earlier.