NEW DELHI: The economy saw “solid” improvements in activities in September implying “a swift GDP growth rebound”, brokerage firm Nomura said in a report on Tuesday. It added that in the second quarter of the current financial year, the GDP contraction is likely to have narrowed to (-)10.4 per cent from the sharp (-)23.9 per cent seen in the last quarter.
The Nomura Monthly Activity Indicator, which takes into account high-frequency indicators, improved to -8.6 per cent year-on-year in September from -19.7 per cent in August and a record low of -37.8 per cent in June. In the run-up to the festive season, aggregate demand recovered to 77 per cent of normal in September as against 71 per cent in the month-ago period while aggregate supply picked up to 92 per cent of normal in September as against 86 per cent in August.
Similarly, consumption, investment and the industrial sector recovered to 84 per cent, 85 per cent and 89 per cent of pre-pandemic levels, respectively, in September. However, recovery in the services sector “remains glacial” at 30.5 per cent of normal as compared to August. Notwithstanding the improvements, Nomura retained its earlier forecast of a 10.8 per cent contraction for the economy in FY21 along with negative growth estimates for the remaining quarters (-5.4% in Q3 and -4.3% in Q4).
The analysts further questioned the durability of the rebound beyond the festive season. It noted that the pick up in indicators could signal a “faux recovery” limited to festive demand and the gains made in reducing the daily Covid-19 cases could be reversed due to factors such as the Bihar elections, resulting in a drag on growth momentum. The underlying weakness in labour market (pressure on household incomes) and the government’s underwhelming demand side fiscal support are also a concern, Nomura said.