India's business activity witnessed a sharp drop last week as restrictions imposed by states due to the second wave of Covid-19 infections impacted mobility. The Nomura India Business Resumption Index, which tracks the pace of business activity in the country on a weekly basis, dipped to 64.5 for the week ended May 9, down from 69.7 in the previous week, falling to levels last seen in June 2020 when the country was emerging from a nation-wide lockdown.
In a note released on Tuesday, Nomura cautioned that sharply declining mobility may exaggerate the hit to economic activity.
“The sharp drop in NIBRI suggests that the rolling state-wide lockdowns are hurting sequential growth,” Nomura economists Sonal Varma and Aurodeep Nandi said in the note.
The tracker monitors high frequency indicators such as mobility indices, power demand and labour participation rate.
The fall in NIBRI continued to be driven by declining mobility as Google’s workplace, and retail and recreation mobility indices fell by 10 percentage points each over the week, while the Apple driving index shrank 8 percentage points, Nomura said.
Power demand contracted 4.1% on a weekly basis even as the labour participation rate rose 41.3% over 38.9% a week before.
India recorded 329,942 fresh cases of Covid-19 and 3,876 deaths in 24 hours, as per official data released on Tuesday morning. The Centre has said it will not impose a blanket lockdown, but a number of states have imposed restrictions on movement to check the rapid spread of the virus.
Nomura recently slashed its growth projection for India for the current financial year to 10.8% from 12.6% as the recent lockdowns impacted the momentum of the country’s economic recovery after last year’s lockdowns.
However, the Japanese financial services major expects the second quarter to be better for the Indian economy. “We expect a localised hit in Q2 and believe that medium-term tailwinds (vaccine pivot, global recovery, easy financial conditions) remain intact,” the company said in its note.