Recent uptick in economy likely to fade, due to rising COVID-19 cases, says Nomura report

The recent improvements in activity during the initial post-lockdown phase are likely to fade after a normalising, said a Nomura report on Monday.

“While high frequency indicators for Q2 broadly suggest a normalization, we see a rising risk that the sequential improvement in activity may fade after the initial post-lockdown normalization,” it said.

Further, the persistent rise in daily cases is likely to impact India’s economic recovery, according to the report.


“With daily cases continuing to pick up both nationally and in traditionally safer states (the South and East), we expect increased risk aversion from the public and local governments to weigh on the pace of the economic recovery,” it said.

The Nomura India Business Resumption Index (NIBRI), which is a weekly tracker of the pace at which economic activity normalises, remained broadly unchanged at 70.1 for the week ending July 26, over the previous week.

In addition, mobility indices, which started flattening in mid-June, have now begun to worsen. “Overall, the NIBRI suggests activity remains stuck at ~30pp (percentage points) below pre-pandemic levels, with the unyielding pandemic curve flattening the mobility curve,” Nomura said.

The increase in power demand was a positive sign, the report said, citing the 3.5% weekly increase over the already-elevated 7.9% pick up in the previous week. However, this was not enough to offset weakening mobility, it added.

The report also cited a drop in the weekly labour participation rate to 41.1% from 41.7% earlier, even as unemployment rose to 8.2% from 7.9%.

The government has been citing improvements in leading indicators such as power demand and mobility indices since May and June as indicators of a quick recovery.