India on verge of leaving Covid behind & see near-full recovery

MUMBAI: Back in September, the Indian economy was in a technical recession with many predicting that the worst was yet to come given the rampant job losses and surging Covid-19 cases. Six months since, the economy appears to be on the verge of recovering from the impact of the pandemic fully.

Nomura’s India Business Resumption Index (NIBRI), a measurement for tracking the extent of normalisation in the economy, has hit 98.1 points during the fortnight ended February 14. The measure may very well hit the 100 mark, which will signify full recovery by the end of this month.

“The continued recovery in NIBRI is strongly predicated on the containment of the pandemic. Beyond this, we remain upbeat on the growth prospects due to the confluence of fiscal activism, the lagged effects of easy financial conditions, base effects and faster global growth,” Nomura said in a note.

During the national lockdown in April-June, the Nomura India Business Resumption Index had hit a record low of 44.8, reflecting the extent to which the economy was brought to a grinding halt by the Covid-19 virus and the government’s efforts to contain it.

India’s GDP contracted nearly 24 per cent in the June quarter and another 7.5 per cent in the September quarter, which confirmed the first-ever technical recession in post-Independence India.

Since its trough in April last year, NIBRI has remained on an uptrend through 2020 and that continued into January-March of 2021, reflecting fewer new pandemic cases. “This supports our view that the sequential momentum remains positive and that year-on-year GDP growth likely moved into the positive territory, at 1.5% in Q4 of 2020 and 2.1% in Q1 of 2021,” the brokerage said.

RBI in its December monetary policy statement had indicated that the GDP growth could turn positive in the December quarter. The central bank expects the economy to now grow at 10.5 per cent in 2021-22. Similarly, the government has pegged its estimate for India’s real GDP growth at 11 per cent for the next financial year.

Seeing the extent of recovery and the rollout of the Covid-19 pandemic, most economists are of the view that both the government and RBI are being conservative in their projections. Nomura India expects real GDP to grow 13.5 per cent in 2021-22, likely making India the fastest growing large economy in the world.