Recovery setting in needs government boost

Recovery setting in needs government boost

Data suggests incipient recovery, much-needed, after the 24% fall in economic activity during April-June. The IHS Markit Purchasing Managers’ Index for manufacturing rose to 52 in August from 46 in July. New domestic orders led the recovery, after a contraction of four months. The order-to-inventory ratio picked up to 1.3 from 1.1 in July, thanks to resumption of business. Export orders lagged, though the pace of contraction eased. GST collections remained stable with the gradual opening up of the economy. It stood at `86,449 crore — 88% of the year-earlier level. Collections in June stood higher only by 1%, but 85.6% of the year-earlier level. Revenues from domestic transactions were 92% of the July 2019 collections. Hopefully, the resumption of economic activity will push up imports and collections from the Integrated GST.

The issuance of e-way bills, which track inter-state and intra-state movement of goods, reached 99.8% of the last year’s level in August, signalling the resumption of trading. An uptick in auto sales, with automakers posting double-digit growth in sales, is also welcome. Power consumption this August was just 0.85% lower than a year ago, 110.57 billion units compared to 111.52 billion units. Railway freight traffic rose by 3.6% to 94.33 million tonnes compared to 91.02 million tonnes in August last year. The Google Mobility Index shows a 2% rise for trends in places such as supermarkets and pharmacies on August 28, compared to that of the levels in February. However, mobility relating to retail and recreation and transit activity was (39% and 34%) lower during the same period. The revival in sectors such as tourism and hospitality would hinge on the discovery and availability of a vaccine.

Nomura finds labour participation fell to 39.5% for the week ended August 30 from 40.5% the previous week, and unemployment worsened to 8.1% from 7.5%. Data for core industries in July showed a contraction. To inject vigour in the recovery, it is imperative that the government catalyse large-scale investment, even if it does not spend much directly.