SBI’s Business Activity Index dips to a new low

Our Bureau Mumbai | Updated on April 29, 2021

Lockdowns/ restrictions imposed in various States having significant impact on economic activity

State Bank of India’s Business Activity Index, which has been declining in April 2021, has now dipped to a new low of 75.7, the level it attained in August 2020.

According to the SBI’s economic research report ‘Ecowrap’, the index level, which is now 24.3 per cent down from-pre pandemic level, indicates that the disruption caused by increased lockdowns/restrictionsin different States is now having a significant impact on economic activity.

All the indicators, except for labour participation and electricity consumption, have declined significantly during April, hinting that labour market disruptions are still manageable unlike the first wave, the report said.

Last week, in a special research report, SBI’s Economic Research Department said the latest reading for the week ended April 19, 2021 was at 86.3, the lowest in five months. In the week ended November 16, 2020, the Index value had declined to 85.7.

The report observed that the 7-Day Moving Average of daily tests and daily new cases in India are both increasing at a rapid pace. However, last year from late December 2020 to mid-February 2021 India’s daily new cases reduced significantly but at the same time daily tests also declined.

“Thus it should not be the case that India becomes complacent again and reduce its tests just to show lower infection rate as this could lead to widespread increase in infection as has happened in the current wave,” Soumya Kanti Ghosh, Group Chief Economic Adviser, SBI, said.

Transmission air borne

The report noted that it is believed that elections and/ or public congregations are one of the major factors behind the record cases in election States.

In contrast, in some states such as Maharashtra, Delhi and Chhattisgarh, even as mobility has declined significantly, cases have increased and only recently have shown some stabilisation, but no meaningful decline, as per Ecowrap

This is despite a state like Maharashtra being in a lockdown mode for the last 3 weeks (7 day moving average of daily cases at 60,000), Ghosh said.

He assessed that this indicates that the transmission may not be possibly only through humans, but it is air borne. Hence, this makes a strong case of mass sanitization of public places for disinfection.

The report estimated that Maharashtra will have 9.5 lakh active cases at the time of second peak from its current level of 6.7 lakh, contributing to around 26 per cent in total active cases estimated at country’s second peak.

Next will be Karnataka which is expected to have 3.5 lakh active cases compared to its current level of 3.0 lakh, it added.

As per the report, major 16 States will account for 95.7 per cent of the total active cases estimated for the country.

“Various States on an average are expected to reach their peak around the national peak date, indicating the worst would be hopefully over by 3rd week of May,” Ghosh said.

Ghosh believes that a differential pricing is an important caveat to lure foreign vaccine manufacturers to India and companies such Pfizer have already responded favourably. This could also be a good opportunity to incentivise local production of vaccine intermediate inputs/API under Production Linked Incentive Scheme, he added.

“With augmenting production capacity of vaccines and new vaccines getting imported, we believe a total of 1048 million doses can be given in India by October 2021 in which 15 per cent of the population can be fully vaccinated and 63 per cent can get their first shot.

“Experience of other countries show infections stabilise after 15 per cent of population receive second dose,” he said.

The report recommended adopting a cluster based approach for immunisation in initial stages. Door-to-door vaccination of the elderly and disabled residents may be encouraged, it added.

Ghosh emphasised that in a country like India, where the demographics change from State to State, city to city, and even from one neighbourhood to another, a highly decentralised approach seems most logical.

Published on April 29, 2021

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