Economic activity in India hit a high last week following a new pandemic, the Nomura India Business Resumption Index indicated, with most indicators showing improvement, even as electricity demand eased from last week There has been a decline.
Nomura said in a statement that the index rose to an all-time high of 108.8 for the week ended October 17, up from 105 in the previous period. A reading of 100 on the index, which uses February 23, 2020, as its base, relates to the pre-pandemic economic activity level.
While mobility levels rose sharply, and the labor force participation rate increased from 40.4 percent to 41.6 percent, electricity demand declined by 1.7% after a 0.3% increase in the previous week, according to Nomura research economists Sonal Verma and Aurodeep Nandi wrote in a note reading the latest index.
However, economists raised concerns about supply-side risks, including the coal and power situation in India. Last week, Nomura warned that industrial production could suffer if power cuts became more widespread.
“Even though demand is improving, supply constraints have emerged as a major constraint. Shortage of coal is disrupting supply to non-power customers, while chip shortage has impacted sales of passenger vehicles during the festive season. As supply conflicts with demand, we view high inflation as a major risk,” he said.
Nomura economists pointed out that with domestic flights allowed to operate at full capacity from Monday, the transport sector will get a further boost. Although the pace of vaccination slowed down in October, India will cross the milestone of delivering one billion vaccine doses this week, he said. Vaccine coverage was able to reopen and this had boosted mobility.
The Nomura India Business Resumption Index also relies on seven-day moving averages of mobility data from Google and Apple, electricity demand data and labor force participation rates, among other indicators.