With a ‘broadened and strengthened’ economic recovery in September this year from the pandemic-induced lows seen in April 2020, nine of India’s tracked 15 non-financial high frequency indicators recorded growth in September, while five posted a narrower year-on-year (YoY) contraction in that month, according to domestic ratings agency ICRA.
ICRA, however, cautioned that the sustainability of the upturn is unlikely to be universal, and that while fatigue may drive festive season sales, the momentum may subsequently subside.
"The recovery in GST e-way bills, electricity, petrol and diesel in September 2020 provides a meaningful signal of a broader economic revival. The improvement in some of the other indicators, such as auto output, reflects a combination of pent-up demand, healthy rural sentiment, and inventory build-up, ahead of the upcoming festive season," Aditi Nayar, ICRA principal economist said.
"This trend may persist in the coming one-to-two months, before settling at more sedate levels after the festive season is over. Sharp favourable base effects have contributed to the high performance of some outliers, such as the output of Coal India Ltd (CIL), which are likely to be unsustainable," he said.
Moreover, she cautioned about the sustainability of the trend especially regarding the improvement in non-oil merchandise exports, in the light of a fresh wave of Covid-19 infections in many trading partners. "Overall, we await signals of the durability of the nascent upturn that emerged in September 2020," Nayar said.
"The healthy 9.6 per cent increase in the generation of GST [goods and services tax] e-way bills on a YoY basis in September 2020, in contrast to the contraction of 3.5 per cent in August 2020, signals a wider revival in economic activity," she added.