SBI business activity index at 5-month low

State Bank of India’s Business Activity Index is now at a 5-month low at 86.3 in the week ended April 19. All indicators have shown a dip with maximum decline in Apple mobility, weekly food arrival at mandis, and RTO revenue collection, according to SBI’s ERD.

This is in line with Nomura India Business Resumption Index (NIBRI), which indicated that the pace of economic activity has dipped to 83.8 for the week ending April 18 versus 88.4 in the previous week (revised down from 90.4) This suggests that the economy is ~16.2pp below its pre-pandemic normal, and at levels last seen in October-end.

“A key reason behind the fall in NIBRI is a deterioration in mobility indicators in response to the restrictions and cautious consumer behaviour. Google retail and recreation and workplace mobility indicators have fallen by 1.3pp and 3.6pp from the previous week, respectively, while the Apple driving index has dropped by a significant 19pp, particularly in the cities of Maharashtra. The Traffic Congestion Index (TCI) has also fallen further to 7.5 as of April 18 versus ~10 as of April 13, and down from 16 a month earlier, although above the levels (of 2) a year earlier,” sais Nomura on April 19.

GDP growth forecast

SBI’s Economic Research Department has also revised its real GDP growth forecast downwards from 11 per cent to 10.4 per cent in FY22 in view of the pandemic-related partial/ local/ weekend lockdown in almost all States.

The ERD estimated the total monetary impact (total loss) of current lockdown in various States at ₹1.5-lakh crore. Of this, Maharashtra, Madhya Pradesh and Rajasthan account for 80 per cent.

“Maharashtra has put up a stringent lockdown among all States. Being the economically biggest and most industrialised State in India, this lockdown will have huge impact on growth.

“Currently we estimate loss of around ₹82,000 crore for Maharashtra (accounts for 54 per cent of the total loss), which will definitely increase if restrictions are further tightened,” said Soumya Kanti Ghosh, Group Chief Economic Adviser, SBI.

Migration of labour

As per ERD’s presentation, ‘Thwarting the Second Wave: Rapid Vaccination Should be the Primary Tool and Not Lockdown’, migration of labour is continuing unabated.

According to the data provided by Western Railways (headquarters, Mumbai; for the period April 1-12), almost 4.32 lakh people have returned to States such as Uttar Pradesh (UP), West Bengal (WB), Bihar, Assam and Odisha from Maharashtra.

“Of 4.32 lakh, around 3.23 lakh reverse migrated to UP and Bihar alone. From Central Railways our estimate indicates that around 4.7 lakh reverse migrated to northern and eastern states from Maharashtra,” said the presentation.

The ERD’s model suggests that the estimated peak time is 96 days from February 15, indicating the peak happening in the third week of May.

“It may be noted that we are incrementally adding around 15,000 more cases over peak of previous day as of today, though such numbers are difficult to predict.

“Uttar Pradesh and Maharashtra achieved peak before national peak in first wave. Now, new cases in Maharashtra seem to be stabilising but the share of cases in total of various other States (Chhattisgarh, Madhya Pradesh, Gujarat) has increased in the current second wave and these are showing increase in daily new cases,” said Ghosh.

So, if other States also implement strict actions and control the spread, then national peak may come within two weeks after Maharashtra peak, he added.