India Economy Moving Towards Normalcy

Easing of restrictions and improved mobility, with the vaccination drive picking up momentum, has led to a gradual healing of the economy with the manufacturing and services sectors showing signs of recovery and employment on the uptick.

India’s active COVID-19 caseload dropped to 227,347 as of October 11, according to the health ministry’s latest update. The recovery rate is currently at 98 percent, the highest since March 2020.

Together with the COVID-19 scenario, the economy too is moving towards normalcy based on signs of a revival in the manufacturing and services sectors, higher employment generation and easing of restrictions on public mobility.

Manufacturing is “gradually normalising” with the tapering of the second wave of the pandemic, said the Reserve Bank of India’s (RBI) October 2021 Monetary Policy report released on Friday. Recovery was also observed in service industries such as travel and hospitality, real estate and contact-intensive professional services in quarter two, the report said.

“According to the Reserve Bank’s industrial outlook survey, the manufacturing sector’s sentiments rebounded in Q2 of 2020-21, with the business assessment index improving to 116.7 in Q2 of 2021-22 from 89.7 in Q1 of 2021-22,” the report said.

“Consumer non-durables surpassed the pre-COVID levels during June and remained strong in Q2, while infrastructure and primary goods, steel, and cement made progress towards normalisation in June and surpassed pre-pandemic level(s) in Q2,” the report added.

Employment Uptick

Employment generation improved in June and July in the organised sector, the Monetary Policy report said, citing payroll data. “Increase in hirings is led by the IT {information technology} sector, while non-IT sectors such as education, banking, financial, insurance, hospitality and automobile sector(s) have also shown strong recovery recently,” the report added, citing data on Naukri Jobspeak, a monthly indicator of hiring levels.

September saw an 8.5 million increase in jobs, according to the Centre for Monitoring Indian Economy (CMIE) data. “Employment in September 2021 is estimated at 406.2 million. This is the highest in 20 months or since the COVID-19 shock in March 2020,” CMIE said in a statement on October 1.

“It is, however, still lower than the pre-COVID employment of 408.9 million in 2019-20. It is also slightly lower than the September 2019 employment level of 406.7 million,” it added. The silver lining to the rise in September is an increase in salaried jobs, the report said.

About 77 percent, or 6.5 million jobs added during last month were in rural India, another statement by by CMIE on October 4 said. The construction industry was the largest jobs provider in September, possibly because of road building and a push for jobs under the Mahatma Gandhi National Rural Guarantee Scheme.

“This is an extraordinary increase in rural India in the month of September when the demand for labour from agriculture is usually low. Surely, agriculture absorbed an additional 0.55 million during the month. But, the remaining and much larger 6 million were absorbed in non-farm rural jobs,” the report said.

Easing of Restrictions

The Oxford Coronavirus Government Response Tracker measures the strictness of a government’s policy responses towards COVID-19 based on a Stringency Index that calculates the mean score of nine policy measures such as school closures, workplace closures, stay-at home requirements and travel bans., each taking a value of between 0 and 100.
A higher score indicates a stricter government response with 100 being the strictest on the scale.

The chart below shows India’s stringency levels stand at 65.28 as of October 5. This had scaled to 81.94 in May amid the deadly second wave witnessed across the country. Stringency levels dropped to 57.87 in March, the lowest since the pandemic began last year.

With the drop in stringency levels, public mobility has picked up. Based on Google’s COVID-19 Community Mobility Report data, India’s mobility levels including visits to places like groceries/pharmacies, parks, retail/recreation places, workplaces and residence has changed over a period of time. The mobility report measures changes compared to a baseline value before the pre-COVID lockdown (January 3 – February 6, 2020) period.

Mobility patterns have shown significant improvement after dropping in May 2021, post the second wave. Visits to supermarkets, pharmacies and food shops and parks have improved significantly, the data suggests. Outings for retail and recreation–such as restaurants, cafés, shopping centres, museums, libraries and cinemas–too are also rising albeit still below the pre-COVID era levels. Likewise, use of public transport and workplaces also show signs of a recovery since May.

(Economy India)