India’s Economic Recovery is ‘Incomplete’, Says ICRA

GDP to grow double digits in Q1, but activity still trailing Jun 2019 quarter levels

Updated on: 15 July 2021 11:24 pm

Even though the lifting of state-wise restrictions has ushered in a recovery in the economic momentum, the performance of most high-frequency indicators in June 2021 remained below the pre-Covid-19 levels of June 2019. The recovery is ‘incomplete’, a report by rating agency Icra said.

The Indian economy will grow in double digits for the April-June period on the low base of 2020-21 but will still be short of the levels observed in the first quarter of 2019-20, it said.

"The real GDP in Q1FY22 will trail the Q1FY20 level while recording a double-digit y-o-y (year-on-year) expansion," it said in the report.

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The nationwide lockdown had resulted in a 23.7 per cent contraction in the GDP in the June quarter of FY20 and was also one of the prime reasons for the 7.3 per cent contraction in 2020-21.

Its Chief Economist Aditi Nayar said the year-on-year (y-o-y) performance of 13 of the 15 high-frequency indicators expectedly flattened in June 2021, relative to May 2021 and several indicators recorded a sequential improvement in June 2021, as the states started lifting restrictions with the subsiding of the second wave of Covid-19.

"While this confirms that a revival has set in, volumes for most non-financial indicators in June 2021 were weaker than the levels in both April 2021 and June 2019, suggesting that the recovery is incomplete," she added.

After comparing volumes across sectors in June 2021 with both June 2019 and April 2021, the agency pointed out that the volumes in June 2021 trailed the June 2019 level for eight of the 13 non-financial indicators. They were weaker than April 2021 for nine indicators, highlighting that while recovery has undoubtedly set in, it remains incomplete, Icra said.

The momentum improved on a sequential basis for 10 of the 13 non-financial monthly indicators during June 2021, which included vehicle registrations (+127.2 per cent), automobile output (109.9 per cent), generation of GST e-way bills (+36.8 per cent), petrol consumption (21.0 per cent) and diesel (12.0 per cent), non-oil merchandise exports (5.8 per cent), and electricity generation (2.9 per cent).