India's declining pace of business activity bottomed out in May: Nomura

The declining pace of India’s business activity appears to have bottomed out as the momentum gathered pace last week, breaking an 11-week falling streak, according to Japanese brokerage Nomura.

The Nomura India Business Resumption Index (NIBRI) picked up to 63.6 for the week ended May 30, from a low of 60.3 a week earlier, the firm said in a note on Monday.

The NIBRI had fallen to its lowest level in a year, dipping to figures last seen in June 2020, as lockdowns intensified over the month in response to the second wave of Covid-19.

Generation of Goods and Services Tax e-way bills, an indicator of inter- and intra-state movement of goods and services, plummeted to the lowest since June 2020, at 38.2 million as of May 30.

“If the NIBRI continues to exhibit a nadir over coming weeks, it will support our view that the worst hit to activity is limited to May, and a sequential improvement will follow in June,” said Nomura economists Sonal Varma and Aurodeep Nandi, in the note.

The uptick was driven by mobility indicators with Google’s workplace and retail and recreation mobility indices improving by 5.1 percentage points (pp) and 3.1pp, respectively while the Apple driving index rose by 6.1pp, after a 4.6pp rise the previous week, the note said.

Power consumption also posted a 5% weekly increase, reversing the average 4% contraction seen over the past six week, Nomura said.

The unemployment rate, while still elevated at 12.2%, recorded an improvement from 14.7% even as the labour participation rate moderated to 39% from 39.4% a week ago.

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According to Nomura, mobility and activity would improve in the coming months as states start gradually lifting lockdowns and restrictions from June onwards.

Based on falling daily fresh cases and positivity rates, various states have extended lockdowns into June while easing certain restrictions.

Maharashtra extended its lockdown till June 15, while Delhi permitted factory and construction work along with extending other lockdown restrictions till June 7.

India recorded 152,734 new cases on Monday compared to 401,993 at the start of the month. Daily deaths remained elevated at 3,128 on Monday, but lower than 4,529 reported on May 17.

“A key risk is a resurgence of cases as states relax lockdowns,” Nomura said.

With vaccinations expected to pick up pace, the impact of the second wave would be less than feared, Nomura said.



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