#39;V#39;-shaped recovery on resumption in business activity, says report by Japanese brokerage Nomura

There has been a ‘V’-shaped recovery in resumption after the second wave of the pandemic, and business activity is now closing in on the pre-pandemic levels, a report by a Japanese brokerage said on Monday.

The ‘Nomura India Business Resumption Index’ (NIBRI) accelerated to 96.4 for the week ended on Sunday from 94.9 in the previous week, and is now only 3.6 percentage points (pp) below pre-pandemic levels.

Mobility indicators, such as Google’s workplace and retail and recreation mobility indices, continued to rise (up 2.4 pp and 5.1 pp, respectively, as compared to the preceding week), as did the Apple driving index (up 3.9 pp). Power demand fell 2.8 per cent, after rising 1.4 per cent in the previous week to pre-pandemic levels.

The labour participation rate moderated to 40.4 per cent from 40.6 per cent. “The first flush of conventional monthly data for June suggest a gradual ‘V’-shaped recovery from the nadir in May,” the brokerage said.

In the first half of July, GST e-way bills have moderated to 28.2 million as against 29.9 million in June, railway freight revenues are flat and power demand momentum has eased, but that largely reflects seasonal softness, with underlying activity continuing to improve, it said.

The brokerage said pace of vaccination has slowed marginally in July thus far to an average run-rate of 36 lakh doses per day as against 38 lakh in June, and the pandemic cases are plateauing at an elevated level of about 39,000 per day.

With mobility continuing to pick up through July and broader vaccination coverage still a quarter away, the key risk to India’s growth recovery is the threat of a third wave during this period, it warned.