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India’s recovery momentum plateaus in mid-Nov.

Published: November 24, 2020

India’s business recovery plateaued during the peak festival period due to a weakness in the labour market and power demand, even as mobility indicators continued to improve, according to Japanese brokerage firm Nomura, which recently said the fading of this momentum, the satisfaction of pent-up demand and the likely drag on growth due to government are key downside risks for the economy.

The Nomura India Business Resumption Index (NIBRI) declined marginally to 85.3 for the week ended November 15 from a post-lockdown high of 85.8 a week earlier. The index is trending 15 percentage points below pre-pandemic levels.

The brokerage firm flagged the fading of momentum post the festive season, the satisfaction of pent-up demand, and the likely drag on growth due to government as key downside risks for the economy.

“However, the potential development and distribution of a vaccine by the first half of 2021 could prove to be an important buffer against these risks,” it noted.

The NIBRI tracks high-frequency indicators such as mobility, labour participation, and power consumption to assess post-pandemic recovery.

According to the gauge, mobility data continued to improve, Google’s workplace and retail & recreation mobility indices inched up, while the Apple driving index declined from last week but remains elevated, Indian newspapers reported.

“However, we see continued sluggishness in the labour markets, with the labour participation rate persisting below pre-pandemic levels, falling to 39.5 per cent from 40.2 per cent the previous week. Power demand also contracted by 5.6 per cent week-on-week after an 8.7 per cent pickup the previous week,” the brokerage noted.

In a previous note, Nomura had pointed out that November’s performance was expected to surpass October’s uptick if the improvement in key indicators during the first week of this month held out. The NIBRI picked up to 84.4 for week ending November 1 from 83.3 in the previous week.

Overall, the index improved to 82.4 in October, a rise of 2.6 points from 80.3 in September and 73.6 in August. Real activity data also improved consistently both in the month of September (core infrastructure output, goods and services tax collections) and October (manufacturing purchasing managers’ index, auto sales, and diesel.

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