The normalisation of economic activities in India, which had picked up pace in the third quarter of the current financial year, appears to have gained momentum in the weeks since. As the monthly economic review by the ministry of finance notes, “a sustained and strengthening economic recovery continues to be witnessed in January 2021 across key high frequency indicators.” In its first advance estimates, the National Statistical Office had pegged the economy to contract marginally by 0.1 per cent in the second half of the year. However, considering that the data on economic indicators used to arrive at its estimates was only for seven to eight months of the year, this pick-up in economic activities in the weeks and months thereafter suggests that the economy may do better than previously expected.
On the production side, the Purchasing Managers’ Index for manufacturing and services signals a continued expansion in activities. The PMI manufacturing index rose to 57.7 in January, up from 56.4 the month before, while the PMI services index also rose, although modestly, to 52.8 in January, up from 52.3 in December. Nomura’s India Business Resumption Index also inched up to 96.5 in the week ending February 7, up from 94.4 in the previous week, signalling that economic activities remain only 3.5 percentage points below the pre-pandemic levels. On the consumption side too, the indicators point to an uptick. GST revenues stood at Rs 1.2 lakh crore in January — the highest level recorded since the tax was introduced in 2017. Considering that the average daily GST e-way bill registrations rose to 1.9 million (till January 10), up from 1.8 million over a similar period in December, collections are likely to be healthy this month as well. Similarly, non-oil non-gold imports grew for the second straight month in January, indicating a pick-up in domestic demand. And while railway freight traffic grew by 8.7 per cent in January over last year, vehicle registrations till January 18 were at 47.2 per cent of levels recorded last year.
In its December monetary policy review, the RBI had pegged the economy to grow at 0.7 per cent in the last quarter of the financial year, up from 0.1 per cent in the third quarter. Absence of a surge in infection rates, the current momentum in activities, suggests that growth may well be higher. A smoother and faster rollout of the vaccination programme will help shore up demand for high-contact services, providing a fillip to growth.