India's pace of business resumption plummets in second week of April, Nomura sees more pain ahead

Business and commercial activity in India is slowing down rapidly on account of multiple local lockdowns, and things are likely to get worse before getting better. The economy currently is around the level of October 2020, says Nomura.

The Nomura India Business Resumption Index (NIBRI) dipped to 83.8 for the week ended April 18, compared to a 88.4 week earlier. The week ending April 11 also saw a fall from the previous week. With fresh lockdowns coming into effect in the current week, a farther fall is likely.

Currently, NIBRI is 16 percentage points below the pre-pandemic level. “This suggests that the economy is 16.2 percentage points below its pre-pandemic normal – and at levels last seen in end-October, 2020,” Nomura said in a note on Monday.


Nomura forecast more pain before gain as states are likely to increase restrictions on account of overburdened health infrastructure.

“The rising death rate and anecdotal evidence of hospital infrastructure getting severely burdened, suggests that the current status quo on lockdown stringency, may be compromised in coming weeks,” said Nomura economists Sonal Varma and Aurodeep Nandi, in the note.

Maharashtra, Delhi, MP, Rajasthan, Jharkhand, UP are among states that have imposed various forms of lockdown.

“The…economic impact of the second (covid) wave may very well intensify in coming weeks. Consequently, despite the sharp drop in our business resumption index (NIBRI), it probably has yet to bottom,” the note said.

Rating agency Crisil said the impact of local restrictions were beginning to affect retail mobility, which dipped across more states – with the highest decline seen in Maharashtra

“As of the week ended April 18, e-way bill collections and power supply showed slight softening – indicative of only a marginal impact of the second wave-related restrictions. However, given the volatile nature of daily/ weekly data, it needs to be seen whether the softening of the two indicators was a blip, or marks a shift in trend,” Crisil said.

The key risk, Nomura said, was that the hit to mobility will impact other economic indicators. The Google retail and recreation and workplace mobility indicators fell by 1.3 percentage points and 3.6 percentage points from the previous week, respectively, while the Apple driving index dropped by a significant 19 percentage points.

Apart from contact-based services such as hotels and tourism, increasing restrictions across states have dented e-commerce and the consumer durables sectors as only movement of essential goods was permitted in most of these areas, said industry experts.

Two bits of good news were that although power demand weakened by 3% compared to 3% growth in the previous week, it stood 12% higher than its 2-year ago level, and the labour participation rate inched up to 40.2% from 40.1% last week.

Nomura expects the fall to bottom out in the next 1 to 3 months, depending on the strength of the second covid wave. It also says the pace of vaccination will pick up by June, benefiting the economy.

There should be “a release of pent-up demand in the subsequent quarters,” Nomura said. The firm recently lowered its forecast of India’s growth in FY22 to 12.6% from 13.5% earlier.