Ultra-high frequency data indicate that the Indian economy has begun regaining momentum in June. However, according to reports, the consumer sentiment is expected to remain subdued which will emphatically limit the pace of recovery in Asia’s third largest economy. The consumer sentiments remain subdued this year as people are more worried about the pandemic this time compared to last year.
This comes even after falling caseloads in the economy and robust vaccination drive which is supposed to boost consumer and investors’ confidence. As states gradually ease curbs on business activity, low consumer and investor confidence can spell doom for the economy. It is to be noted that in contrast to the V shaped recovery that was seen last year and was due to the festive and pent-up demand, this year economy will see gradual growth, most likely a U-shaped recovery.
According to the three data trackers by research agencies using a range of data available on daily or weekly basis, the week that had ended on June 13 was at least the third consecutive week in which economic activity had sequentially gained momentum.
Reportedly, the UBS-India Activity Indicator had moved higher for the third consecutive week that ended on 13 June. This was after it had hit a trough in the week that had ended on May 23. This has been corroborated by the Quant Eco Research’s Daily Activity and Recovery Tracker (DART) index, which has also indicated towards a fourth consecutive weekly expansion in economic activity for the week that ended on June 13. Additionally, in the same week, the Nomura India Business Resumption Index also, rose for the third consecutive week. This was led by a strong revival in mobility indicators and higher power demand, after slipping to its lowest in almost a year in the week that ended on May 23.
As has been previously reported, mobility indicators such as Google mobility indices, the Apple Driving Index, and daily railway passenger revenues have all shown strong revival in the month of June. Additionally, E-way bills and imports for the first fortnight of June also showed strong momentum. Thus, India’s economic indicators highlight the gradual resumption of economic activity.
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Additionally, falling from 13.6% a week ago, the jobless rate for the week to June 13 fell to 8.7%. The data was released by the private research firm Centre for Monitoring Indian Economy Pvt. If the jobless claims are broken down on the basis of urban and rural divide, urban unemployment had fallen to 9.7% from 14.4%. Similarly, the rural jobless claims had declined to 8.2% from 13.3%.
Tanvee Gupta Jain, an economist at UBS said that “We expect a sequential pickup in economic activity from June. Unlike the V-shaped recovery in 2020, we expect India to have only a gradual recovery, as consumer sentiment remains weak. That said, we expect the economic recovery to gain momentum from 2H FY22 as consumer and business confidence improve, along with the vaccination ramp-up and control of the pandemic,”.