The worst hit to economic activity is limited to May, and a sequential improvement will follow in June, Japanese brokerage Nomura has said in a report.
After falling for 11 consecutive weeks, the Nomura India Business Resumption Index (NIBRI) registered its first uptick, picking up to 63.6 percentage points (pp) for the week ending 30 May (36.4 pp below pre-pandemic level) from a low of 60.3 pp in the previous week.
Mobility indicators seem to have driven the uptick. Google's workplace and retail & recreation mobility indices picked up by 5.1 pp and 3.1 pp from the previous week, respectively, while the Apple driving index rose by 6.1 pp, after a 4.6 pp rise the previous week.
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Power demand also rose by 5 per cent week-on-week, reversing the average weekly 4 per cent contraction seen for the past six weeks.
The labour participation rate, on the other hand, moderated to 39 per cent from 39.4 per cent, although the unemployment rate improved to a still elevated 12.2 per cent from 14.7 per cent last week.
Nomura said if the NIBRI continues to exhibit a nadir over the coming weeks, it will support its view that the worst hit to economic activity is limited to May, and a sequential improvement will follow in June.
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As the states slowly embark on a calibrated easing of restrictions, mobility should improve, and real activity data should gradually follow, it said.
A key risk is a resurgence of Covid cases as the states relax lockdowns. However, with the vaccination drive likely to pick up, Nomura continues to expect the economic hit from the second wave to be significantly less than that of the first wave, and also less than currently feared.
