The Nomura India Business Resumption Index (NIBRI) dipped to 83.8 for the week ended April 18, representing a substantial 16 percentage points (pp) decline from a week earlier.
“This suggests that the economy is ~16.2pp below its pre-pandemic normal – and at levels last seen in end-October,” Nomura said in a note on Monday.
The weekly tracker of high frequency indicators of economic activity had recorded a 12pp fall in the previous week to settle at 88.4.
Nomura forecast more pain before gain states are likely to increase restrictions on account of overburdened health infrastructure.
“The rising death rate and anecdotal evidence of hospital infrastructure getting severely burdened, suggests that the current status quo on lockdown stringency, may be compromised in coming weeks,” said Nomura economists Sonal Varma and Aurodeep Nandi, in the note.
Delhi imposed a week-long lockdown till Monday which saw a repeat of a mass exodus of migrant workers from the city, as there were less than 100 intensive care unit beds available.
“This suggests that the economic impact of the second wave may very well intensify in coming weeks Consequently, despite the sharp drop in our business resumption index (NIBRI), it probably has yet to bottom,” the note said.
The key risk was that the hit to mobility would manifest in other real economic indicators, it said. The Google retail and recreation and workplace mobility indicators fell by 1.3pp and 3.6pp from the previous week, respectively, while the Apple driving index dropped by a significant 19pp.
Although power demand weakened by 3% comparde 3% growth in the previous week, it stood 12% higher than its 2-year ago level while the labour participation rate inched up to 40.2% from 40.1% last week.
The firm expected the impact to be limited to the next one-three months, with the second wave passing over by July-September.
“It should result in a release of pent-up demand in the subsequent quarters,” Nomura said, adding, “the economy should benefit from faster vaccinations after June”.
The firm maintained its forecast of 11.5% growth for the Indian economy in CY2021.