Roots of the economic recovery deepen in July 2021 with continued unlocking: ICRA

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ICRA highlighted that the continued unlocking across the country has manifest itself in an improving performance across various high frequency industrial and service sector indicators, mobility and toll collections in July 2021. 

According to Ms. Aditi Nayar, Chief Economist, ICRA Ltd: “With the further easing of the state-wise restrictions, especially across the southern states, the roots of the economic recovery deepened in July 2021. Despite a normalising base, eight of the 15 high frequency indicators recorded an encouraging improvement in their year-on-year (YoY) growth in July 2021. Moreover, 10 of the 13 non-financial indicators recorded a month-on-month (MoM) uptick in July 2021, although the pace of the improvement expectedly eased from the levels seen in June 2021, when the state-wise unlocking had commenced.”

ICRA highlighted that the YoY performance of GST e-way bills, fuel consumption, electricity generation, output of Coal India Limited (CIL), vehicle registrations, domestic passenger traffic, etc. improved in July 2021 compared to June 2021. Moreover, the worsening in the YoY performance of some of the remaining indicators such as the output of passenger vehicles (PVs), scooters and motorcycles, was primarily due to the unfavourable base effect.

However, the sequential momentum of growth eased in July 2021, after having recorded a sharp uptick in June 2021. While 10 of the 13 non-financial indicators displayed an increase in MoM terms in July 2021, the pace of the same trailed the surge in June 2021, for indicators such as vehicle registrations, generation of GST e-way bills and auto output. In contrast, ports cargo traffic, diesel consumption and rail freight displayed a decline in MoM terms in July 2021.

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To gauge the strength of the recovery across sectors, we have compared the performance of indicators in July 2021 with the pre-Covid level of July 2019, as well as the levels in April 2021. The volumes of seven of the 13 non-financial indicators (non-oil merchandise exports, GST e-way bills, electricity generation, CIL’s output, petrol consumption, PV output and rail freight traffic) rose above both their pre-Covid as well as April 2021 levels in July 2021. While three indicators, namely, the output of scooters and motorcycles, and vehicle registrations surpassed their April 2021 levels, they trailed the level of July 2019. In contrast, domestic passenger traffic, ports cargo traffic and diesel consumption reported lower volumes in July 2021, relative to both July 2019 and April 2021.

As the states started unlocking, the mobility for retail and recreation posted a sharp improvement from ~60% below baseline at end-May 2021 to 23% below baseline by end-July 2021 (seven day moving average). Further, FASTag toll collections rose by 15.5% to Rs. 29.8 bn in July 2021, while mildly trailing the record-high of Rs. 30.9 bn in March 2021,” Ms. Nayar said.

The early data for August 2021 indicates a mixed trend across the available indicators. While petrol sales of state refiners in the first half of August 2021 exceeded both the year-ago and pre-Covid levels, those for diesel continued to trail their pre-Covid performance. The daily average generation of GST e-way bills remained flattish in the first half of August 2021, relative to July 2021. The YoY rail freight growth stood at a healthy 14.1% during August 1-10, 2021. While the YoY growth of electricity generation has picked up in August 2021 so far, ICRA highlighted that this has been partly driven by the deficient rains (27% below the long period average or LPA during August 1-22, 2021).

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The monthly indicators tracked by ICRA include the production of PVs, motorcycles, scooters, vehicle registrations, output of CIL, electricity generation, non-oil merchandise exports, ports cargo traffic, rail freight traffic, generation of GST e-way bills, domestic airlines’ passenger traffic, consumption of petrol and diesel, aggregate deposits and non-food credit of scheduled commercial banks.