The needle is finally moving for India

New Delhi: The Indian economy gathered pace in June with goods movement rebounding close to pre-lockdown levels and goods and services tax (GST) collections rising sharply from May. Electricity consumption rose and demand for employment under the Mahatma Gandhi National Employment Guarantee Scheme fell, suggesting better industrial demand for labour. Bank credit rose ₹32,022 crore in the fortnight ended June 5. The government had announced a significant easing of restrictions in Unlock 1.0 that began on June 1. More easing has been announced from July 1 even though Covid-19 cases have been rising.GST collections recovered to ₹90,917 crore in June from ₹62,009 crore in May and ₹32,294 crore in April, reflecting a rise in consumption. However, FY21 first-quarter numbers are still 41% lower than the year-earlier figure. The issuance of e-way bills, documents needed to move goods in the GST regime, rose to almost 40 million in June, just short of 40.6 million in March, indicating a sharp recovery in the movement of goods. India imposed a lockdown on March 25 to curb the spread of Covid-19. The purchasing managers’ index for manufacturing (PMI) recovered to 47.2 in June from 30.8 in May. A reading above 50 on this survey based index reflects expansion while that below implies contraction. Indicators such as Regional Transport Office (RTO) transactions, toll collections, electricity consumption and rail freight also showed a recovery. 76741290June Tractor Sales up 12%: M&MRailway freight loading stood at 93.27 million tonnes in June against 82 million tonnes in May, with coal, iron ore and cement being among the largest contributors. Toll collections across national highways in June rose to 80% of the average last week versus 60% in May. “These sectors indicate that economic activity is picking up from June onwards as containment zones no longer extend to entire districts and also that the economy is on an upward trend from the troughs of the lockdown period,” said Chandrajit Banerjee, director general of the Confederation of Indian Industry.Google’s mobility reports signalled a sharp increase in movement to supermarkets and pharmacies, and a relatively milder one to transit stations such as bus stands, railway stations and airports, as well as workplaces between June 1 and June 29.The Centre for Monitoring Indian Economy (CMIE) said unemployment rates fell in June to 11.1% compared with an all-time high of 23% in the lockdown months of April and May, during which 122 million people lost their jobs.The number of households that benefited under MGNREGS last month fell 7.3% to 30.6 million from 33.0 million in May.The rural India has also been an important contributor to the revival story.“I had said last month Bharat may carry India. Tractor sales in June were 12% higher than last year, second highest volume in June ever. Even in automotive demand in rural India picking up faster than in urban," said Pawan Goenka, managing director of Mahindra & Mahindra, in a Twitter post. RISKS TO RECOVERYRising Covid-19 cases pose a risk to recovery with states such as Maharashtra, Tamil Nadu and Jharkhand extending lockdowns while many others have eased restrictions.“The localised lockdowns being imposed in some states/cities suggest that the recovery that was expected to set in from Q2 FY2021 onwards, is likely to be delayed,” said Aditi Nayar, principal economist at ICRA, pointing to the rise in Covid-19 infections. Most indicators are still below pre-lockdown levels despite the sharp recovery in June.“In almost all states (except Tamil Nadu) increase in mobility during Unlock is associated with an increase in total Covid-19 cases,” SBI Research said in a note. More states could impose restrictions if cases rise.The revival in economic activity wasn’t unexpected, said Crisil principal economist DK Joshi.“When the lockdown was imposed, everything crashed but now when it is being gradually lifted, we see some rebound on the economic front,” he said. Infection numbers remain critical. “If it peaks going forward, economic activity will remain subdued.”The calibrated reopening of the economy is welcome, said Sangita Reddy, president of Federation of Indian Chambers of Commerce & Industry (Ficci).“Companies have restarted production and are gradually seeing an improvement in their capacity utilisation levels. Sectors are moving at different pace and while some factories have stepped up to about 60% production, some remain at 30% either due to lack of labour or awaiting demand revival,” she said. “When we look at indicators such as PMI, electricity consumption, generation of E-way bills, railway freight traffic movement, we see an improvement on a month on month basis.”Demand needs to be stepped up in order to maintain the improved levels of capacity utilization, she said.“In this context, it is important that some of the critical sectors such as infrastructure, housing and automobiles get a major thrust from the government,” Reddy said. “These sectors have numerous forward and backward linkages and an improvement in their growth will pull the overall industrial economy forward.”(With inputs from Nishtha Saluja & Kirtika Suneja)

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