Roots of economic recovery deepened in July as Covid restrictions eased: Icra

With the easing of Covid-19-related restrictions by the states, the roots of the economic recovery deepened in July 2021, says a report.

The unlocking in the country has manifested itself in improving performance across various high frequency industrial and service sector indicators, mobility and toll collections in July 2021, according to a report by Icra Ratings.

“With the further easing of the state-wise restrictions, especially across the southern states, the roots of the economic recovery deepened in July 2021. Despite a normalising base, eight of the 15 high-frequency indicators recorded an encouraging improvement in their year-on-year (YoY) growth in July 2021,” the agency's chief economist Aditi Nayar said in a report.

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Moreover, 10 of the 13 non-financial indicators recorded a month-on-month (MoM) uptick in July 2021, although the pace of the improvement expectedly eased from the levels seen in June 2021, when the state-wise unlocking had commenced, she said.

The YoY performance of GST e-way bills, fuel consumption, electricity generation, output of Coal India Limited (CIL), vehicle registrations, domestic passenger traffic, etc. improved in July 2021 compared to June 2021.

Moreover, the worsening in the YoY performance of some of the remaining indicators such as the output of passenger vehicles (PVs), scooters and motorcycles, was primarily due to the unfavourable base effect.

The report, however, said the sequential momentum of growth eased in July 2021, after having recorded a sharp uptick in June 2021.

While 10 of the 13 non-financial indicators displayed an increase in month-on-month terms in July 2021, the pace of the same trailed the surge in June 2021, for indicators such as vehicle registrations, generation of GST e-way bills and auto output, it said.

In contrast, ports cargo traffic, diesel consumption and rail freight displayed a decline in MoM terms in July 2021, it said.

Nayar said the volumes of seven of the 13 non-financial indicators (non-oil merchandise exports, GST e-way bills, electricity generation, CIL's output, petrol consumption, PV output and rail freight traffic) rose above both their pre-Covid as well as April 2021 levels in July 2021.

“As the states started unlocking, the mobility for retail and recreation posted a sharp improvement from around 60 per cent below baseline at end-May 2021 to 23 per cent below baseline by end-July 2021 (seven-day moving average),” she said.

FASTag toll collections rose by 15.5 per cent to Rs 2,980 crore in July 2021, while mildly trailing the record-high of Rs 3,090 crore in March 2021, she added.

The agency further said the early data for August 2021 indicates a mixed trend across the available indicators.

While petrol sales of state refiners in the first half of August 2021 exceeded both the year-ago and pre-Covid levels, those for diesel continued to trail their pre-Covid performance, it said.

The daily average generation of GST e-way bills remained flattish in the first half of August 2021, relative to July 2021.

The YoY rail freight growth stood at a healthy 14.1 per cent during August 1-10, 2021, the agency added.