Local lockdowns temper India’s economic activity in April

Bloomberg | Updated on May 27, 2021

GDP numbers could show growth at 1% in the March quarter compared to previous year period

India’s economic activity showed signs of beginning to cool off in April as several states resorted to lockdowns to control a deadly second wave of the coronavirus.

Although the three-month weighted average scores of eight indicators tracked by Bloomberg News showed the pace of activity was unchanged from March, the single-month reading pointed to weakness setting in.

Also read: India bond returns are the best in Asia as Covid cases drop

Even more recent data from this month confirmed the softening trend in activity. A basket of high-frequency, alternative and market indicators such as retail activity and road congestion pointed to weakness in the week to May 16, Abhishek Gupta, India economist at Bloomberg Economics, said in a report.

The growing economic pain may render next week’s gross domestic product numbers a sideshow. Data on Monday will probably show the economy grew near about 1 per cent from a year earlier in the March quarter, and faster than the 0.4 per cent expansion in the prior three months, before India became the global hotspot for virus infections.

Business activity

Activity in India’s dominant services sector moderated for a second straight month in April. The IHS Markit India Services PMI eased to 54 from 54.6, with a reading above 50 signalling growth. A similar survey for the manufacturing sector showed expansion picking up just a tad.

At the same time, input costs have been rising with implications for headline inflation. That is likely to come up for discussion at next week’s Monetary Policy Committee meeting to decide interest rates.


Exports soared in April, mainly because of a low base the year earlier when a nationwide lockdown crippled economic activity. Shipments jumped 196 per cent, while imports increased 167 per cent year-on-year. Sequentially though, both measures moderated.

Consumer activity

Google mobility indicators exhibited a dip across all major cities in April as compared to the baseline. E-way bills — an indicator of domestic trade — recorded double-digit contraction at 17.5 per cent month-on-month in April — and possibly pointing to a moderation in goods and services tax collections.

Most passenger vehicle manufacturers reported a month-on-month dip in April, reflecting subdued demand. Dispatches of two-wheelers contracted by double-digits, mirroring frail rural demand. Tractor sales weakened amid supply chain constraints and dwindling footfalls at dealerships.

Bank credit grew 5.7 per cent in April from a year earlier, picking up from 5.6 per cent expansion seen in March, central bank data showed. Liquidity conditions stayed comfortable, with the banking system in surplus.

Industrial activity

Industrial production expanded, jumping 22.4 per cent in March from a year earlier, mainly because of a favourable base. But numbers for April are likely at risk from activity curbs because of state-level lockdowns.

Output at infrastructure industries, which makes up 40 per cent of the industrial production index, expanded 6.8 per cent in March from a year ago. Both data are published with a one-month lag.

Published on May 27, 2021

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