Rating agency ICRA said the 'ICRA Business Activity Monitor' stood at a healthy 115.7 in April 2022, displaying a high year-on-year (YoY) growth of 16.1 percent, boosted by the low base related to the onset of the second wave of Covid-19 in India.
The ICRA Business Activity Monitor is a composite indicator that comprises auto production (two-wheelers and PVs), vehicle registrations, the output of Coal India Limited, power generation, rail freight traffic, non-oil merchandise exports, cargo handled at major ports, consumption of petrol and diesel, finished steel consumption, generation of GST e-way bills, domestic airline passenger traffic, aggregate deposits and non-food credit of scheduled commercial banks.
While a majority of its constituents recorded higher volumes in April 2022 relative to the pre-Covid level, a few trailed their April 2019 levels, indicating that while the recovery has gained traction, it remains incomplete, ICRA said.
“The ICRA Business Activity Monitor - an index of high-frequency economic indicators - stood at a healthy 115.7 in April 2022. Encouragingly, it surpassed the performance recorded in all the months of FY22, barring March. Moreover, it exceeded the pre-Covid levels of April 2019 by a considerable 15.8 percent. These trends suggest that Indian economic activity was robust in the just-concluded month, in spite of the escalation in geopolitical tensions," Aditi Nayar, Chief Economist, ICRA, pointed out.
"While a majority of the constituents of this index recorded higher volumes in April 2022, relative to the pre-Covid level, auto output, diesel consumption and airline passenger traffic trailed their April 2019 levels, reinforcing that while the recovery has gained traction after the third wave of Covid-19 in India, it remains uneven,” Nayar added.
Given the sequential decline typically witnessed in the month of April from the March highs, the ICRA Business Activity Monitor reported a modest 6.5 percent month-on-month (MoM) dip in April 2022. However, this was better than the trend seen during April 2019 (-10.1 percent), indicating the momentum of activity remained intact despite the ongoing global headwinds, as was corroborated by near record-high generation of the GST e-way bills. Moreover, FASTag collections touched all-time highs in April 2022, while the mobility for retail and recreation continued to improve, said ICRA.
Although the YoY growth in the ICRA Business Activity Monitor stood at a high 16.1 percent in April 2022, this largely reflects the low base related to the onset of the second wave of Covid-19 in India.
“The YoY growth of several indicators and the ICRA Business Activity Monitor is likely to rise further in May 2022, given the falling base associated with the growing restrictions in the year-ago period. For instance, vehicle registrations stood at 0.8 million in May 1-16, 2022, translating to a considerable 140 percent of the subdued year-ago level (and 46 percent of the April 2022 level)," Nayar said.
"In addition, the YoY growth in electricity demand surged to 20.7 percent during May 1-15, 2022 from 11.5 percent in April 2022, boosted by the heatwave conditions prevailing over Northwest and Central India. However, with higher commodity prices seeping into inflation, demand growth may be constrained in the remainder of this quarter. This, in conjunction with a normalising base, could cause the YoY growth in the ICRA Business Activity Monitor to ease to single-digits by June 2022,” said Nayar.
Disclaimer: The views and recommendations made above are those of the broking firm and not of MintGenie.
