Fragmented recovery of the Indian economy is underway: ICRA

New Delhi: Ratings agency ICRA on Thursday said that the high frequency lead indicators for August suggest a fragmented recovery of the Indian economy is underway.
“The year-on-year performance of 11 of the 16 available indicators staged a pickup in August relative to July,” said Aditi Nayar, principal economist, ICRA in a report on the Indian economy.

As per the report, the output of Coal India Limited, motorcycles, and rail freight traffic posted a turnaround to an expansion in August after having displayed a contraction in the previous month while the pace of contraction in the production of scooters and passenger vehicles, domestic airlines’ passenger traffic, port cargo traffic, GST e-way bills, and the consumption of ATF and petrol, narrowed at a varying rate in August.

However, the on-year performance of diesel consumption, thermal and hydroelectricity generation, non-oil merchandise exports and bank deposits, worsened in August from July, which, as per the report reiterates that there may be “intermittent setbacks before the economy fully recovers from the impact of the ongoing crisis”.

“Moreover, the available trends suggest that the contraction in the Index of Industrial Production could ease to 6-8% in the just-concluded month from 10.4% in July 2020,” the agency said in the report.



India’s gross domestic product shrank 23.9% in the first quarter of FY21, against 5.2% growth in Q1 of FY20 due to various factors, including Covid-19, the government said on Wednesday.

The report showed strong demand with the output of motorcycles recording a 20-month high growth of 5.9% in August supported by the low base and sustained rural demand

While electricity demand improved by 1.2% on year in the first half of September 2020.

“Overall, with a contraction in electricity generation from August-December 2019, this sector may out-perform much of the rest of the economy in the next few months, led by favourable base effects,” ICRA said.

In contrast, the contraction in non-oil merchandise exports worsened in August from July with demand constrained by rising Covid-19 infections in various trading partners, it said.