Report on Key Economic Parameters of India: July-August 2020

Anindya Sengupta

India has been under lock down due to the COVID -19 pandemic since March, 25th, 2020. The lock down has been stringent for the first months with the first set of relaxations announced from April 21st, 2020. This lock down is expected to have severe impact on the economy. From May there has been gradual relaxations.

The Ministry of Statistics and Programme Implementation (MOSPI) , Government of India announced the IIP growth numbers and the Core sector growth figures for July on September, 10th and August, 31st respectively. Reserve Bank of India (RBI) has announced the sectoral credit growth numbers for June on August ,31st. Centre for Monitoring Indian Economy (CMIE) is publishing the unemployment numbers in regular intervals. Let us examine how the Indian economy has been impacted by this lock down.

IIP and Core Sector Growth

Source: Ministry of Statistics and Programme Implementation (MOSPI), Government of India

Both the IIP and the Core sector witnessed negative growth in the month of July. However the extent of negative growth has seen a continuous decline for the last four months. However as compared to July, last year, both the IIP and core sector growth has been significantly lower. So while the economy has seen more activity in July compared to previous three months, it is still far away from normal and still sees a significant negative growth in the month of July also.

It needs to be noted here that in view of the preventive measures and announcement of nation-wide lockdown by the Government to contain spread of COVID-19 pandemic, majority of the industrial sector establishments were not operating from the end of March, 2020 onwards. Moreover the estimated of July 2020 are quick estimates and may be subject to change in subsequent months.

Source: Ministry of Statistics and Programme Implementation (MOSPI), Government of India

The growth of all the sectors showed some improvement with respect to the previous three months but continued to show a decline as compared to last year same month. Manufacturing sector, which is one of the most people intensive sectors showed some improvement as compared to the previous three months. However this remains much lower than the growth numbers in the same month last year. It needs to be noted here that manufacturing sector contributed to almost 80% of the total IIP.

Similar pattern is witnessed in terms of Core sector growth. Steel industry has witnessed the severest burnt in the stringent lock down month. Apart from the fertilizers sector, all other sector continued to show negative growth in June. It should we be noted that compared to the growth rate of April amd May, all sectors apart from cement and refinery saw an improvement in growth rate in June. The COVID -19 pandemic has very less impact on rural India and hence agricultural activity continued to function since April, 21st. Given this there has been a need of fertilizer leading to higher production and hence positive growth in that sector. All other sector did not witness such stream of demand and hence continued to show a decline in growth.

Source: Ministry of Statistics and Programme Implementation (MOSPI), Government of India

CREDIT GROWTH

In order to combat the impact on economy due the pandemic induced lock down, the Government of India and the Reserve Bank of India announced an economic package. A sizable section of the economic package announced by the government and the central bank is targeted to provide more liquidity and credit in the economy. The first set of such policies was announced by RBI in March 28th and then again around mid April. Government of India announced such measures in mid May. Many economists believe that with lack in demand in the economy, there might not be a higher credit off take even after those measures. Let us examine what has been the scenario in terms of credit growth.

Source: Reserve Bank of India

The sectoral credit growth rate showed either a marginal decline or remained same in the month of July, 2020 as compared to the growth rate of June, 2020 for almost all the sectors. Agriculture and Allied sector and personal loan sector witnessed a increase compared to the previous months However when compared to July, 19 then all sectors witnessed a severe decline in credit growth. The decline has been severe for personal loan segment. However this month shows a positive trend. The personal loan growth is a reflection of demand in the economy and a decline in this reflects lack of demand in the economy. However within the retail loan sector, there has been a surge in auto loan. There has been a considerable decline in all other type of retail loans.

As we see a decline in credit growth of industry sector from the previous three months, let us examine what is driving this. A host of credit measures were taken focusing on the small and medium enterprises. It needs to be noted here that both the micro and medium industrial sector which actually is a source of employment for vast majority witnessed a decline in credit growth. Only the large industrial segment witnessed a positive growth.

Source: Reserve Bank of India

The credit growth for micro, small and medium sized industry segment continued to show a negative growth in July, like the previous three months. The decline in credit growth for small, micro and medium sized industry segment has been less severe in July as compared to the previous months. The large industries show a lower increase in the month of July as compared to the previous four months. So the small, micro and medium industry sector which is one of the most people intensive sectors does not show a credit uptake at least till July and the large industries are also showing a lower uptake. During mid of May, a host of credit schemes targeting this sector has been announced by the government. However, there is no significant impact of the measures at least till June. It remains to be seen how it impacts in the coming months.

Car and Two Wheeler Sales

Source: http://www.rushlane.com

The credit growth numbers showed that the vehicle loans growth has been more than the same month in the previous year and is the only type of retail loan which is seeing a increase in growth. This is reflected in the car sales and two wheeler sales numbers. Month of August has seen a significant growth in both car and two wheeler sales as compared to the previous month. This is a reflection of the fact that there has been significant surge in economic activity after unlock 1 starting from June, 1st. The sales numbers has been more than the numbers achieved in August, 19. So automobile sales shows signs of recovery. It needs to be noted here that both the car sales and two wheeler sales declined in previous financial year as compared to the earlier years.

Unemployment

The IIP figures and the credit growth numbers suggest slump in the manufacturing sector and small and micro enterprises. Both these sectors are people intensive sectors and can have severe impact on unemployment levels. However agriculture sector has been functioning. Moreover additional budget has been allocated to MGNREGA for ensuring more employment, Let us see what has been the impact of unemployment trends.

Source: CMIE

The unemployment rates had seen a record increase in the month of April and May. However with the unlock 1 starting from June, 1st, there has been a significant decline in unemployment rate in the month of June, 2020. It further declined in July. However this showed some increase in August, compared to July. The unemployment rate is comparable to what was there one year back. The unemployment rate in urban India is more than that in rural India.

It needs to be noted here that the unemployment levels in the pre-corona level has itself been in the higher side. The overall unemployment rate which stood at 2.3% in 2011-12 showed a record increase to 6.1% in 2017-18, highest in 45 years. This showed a marginal decline to 5.8% in 2018-19. So overall the unemployment rate which has been in a higher side sees a further growth given this pandemic.

Literacy rate in India touches 77.7% – Kerala tops, Andhra at the bottom

~ Trinanjan Chakraborty

The 75th round of the National Statistical Survey conducted by the National Statistical Office revels that literacy among individuals aged 7 & above stood at 77.7% for the time period July 2017 – June 2018. The 2011 population census had reported all India literacy rate at 74.04%. The NSS 75th round revealed that while urban literacy was 87.7%, rural literacy stood at 73.5%. Gender-wise, a big disparity exists with literacy among males (7 years & above) being 84.7% while the same among females standing at 70.3%. In rural areas 46.1% of males and 40.7% of females in the 3 – 35 years age-group were currently attending an educational institution. The same figures for urban areas was 46.7% (M) and 42.6% (F).

Completed educational levels in Urban and Rural among individuals aged 15 & above:

(Total >100.0% due to decimal approximation)

However, a big disparity exists across states in terms of literacy.

State wise literacy rate among 7 years and above (figs in %) – for large states
(excluding N/E and UTs except NCT of Delhi)

While Kerala is at no 1 on both male and female literacy with only 3.8% of population aged 7 years & above reported as “Illiterate”, Andhra Pradesh at the other extreme, has nearly 2/3rd of its population of the same age group as “Illiterate.” While male literacy is lowest in Andhra among all states (73.4%), in female literacy, Rajasthan is at the bottom (only 57.6% literate). In what would be a cause of concern, the literacy rate is well below the national average in some of India’s largest and most populous states like Andhra, Rajasthan, Bihar, Telangana and UP (the bottom 5) with Madhya Pradesh at 6th from bottom.

Top 5 states in terms of highest completed education as “Graduate & above” among 15 years or above population:

Delhi – 24.7% | Uttarakhand – 18.7% | Telangana – 15.8% | Kerala – 14.9% | Haryana – 14.8%

Bottom 5 states in terms of highest completed education as “Graduate & above” among 15 years or above population:

Jharkhand – 5.3% | Bihar – 6.0% | Assam – 6.2% | Odisha – 7.0% | Chhattisgarh – 7.2%

COMPUTER OWNERSHIP & INTERNET FACILITY:

At an all India level, 10.7% households (U+R) owned a personal computer while 23.8% had access to internet facility during the survey year, according to the survey results. Computer ownership and internet facility was 23.4% and 42.0% respectively in urban while the same stood at 4.4% and 14.9% in rural households. Among the states, Delhi topped the charts on both – with 34.9% computer ownership and 55.7% internet facility while Odisha was at the bottom on both – just 4.3% computer ownership and 10.0% internet facility.

All India, 16.5% in the age group of 5 years and above claimed to be proficient in handling a computer – 32.4% in Urban and 9.9% in Rural.

Indian Economy: Current Assessment and Way Forward

Anindya Sengupta

The GDP numbers for April- June, 2020 was announced on 31st August. The country went into a stringent lock down from 25th March. So this quarter began with a near to complete shutdown in economic activity with only the essential services was active. Since April 21st, gradually in phases certain sections of the economy has opened up, however this was very limited initially. Over time the unlock phase began with the economy opening up gradually. So this has been the most deadly quarter in terms of restrictions into economic activity.

Present Performance

It was widely expected that there is going to be a fall in growth rate. There was consensus that there will be a drop in the growth rate. But what will be the extent of the decline? There were multiple views on the same. Ministry of Statistics and Programme Implementation, Government of India announced that the GDP growth rate ( YoY) has declined to -23.9% as against a 5.2% growth in the same quarter, last year. In comparison with Jan- Mar, 2020, the growth rate declined to -29.2%.

Source: Ministry of Statistics & Programme Implementation (MOSPI), Government of India

The massive decline of around 24% in the quarter of April-June, lead to a GDP value which is less than the GDP value in this quarter in the last 5 years. The GDP value in this quarter is comparable to the 2015-16, April-June level. So it can be said that the GDP level has leaped back by 5 years given this pandemic.

Source: Ministry of Statistics & Programme Implementation (MOSPI), Government of India

In order to understand the how will the recovery path be, it is important to understand how resilient the economy was before the advent of COVID and how different sectors performed during the COVID. So a decoding of the performance of the economy is utmost necessary to understand the potential recovery path.

Decoding the Performance of the Economy: PRE-COVID Scenario

Source: Ministry of Statistics & Programme Implementation (MOSPI), Government of India

It can be seen that there has been a constant drop in the growth rate from 2016-17 onwards. The GDP growth rate of 2019-20 is the lowest in 11 years. It should be noted here that the impact of the lockdown due to COVID-19 was effective for only 7 days in FY 2019-20. Hence this drop in growth numbers cannot be only due to the lock down. It can be said that Indian Economy was showing a declining trend in the pre-COVID phase itself. It is important to understand why there was a declining trend.

The major component of GDP are the Private Consumption expenditure (a measure for demand) and gross capital formation (a measure for investment). Together they constitute over 87% of the economy. The growth rate of private consumption expenditure has been showing a declining trend for the last few years. Investment growth was negative last financial year (FY 19-20).

Lower growth in demand will mean lower profit for the companies and lower investment. Since the Indian economy has been witnessing a decline in demand growth, this can be in all probability be the reason behind declining growth in investment. Successive governments in India have adopted investment friendly policies. Moreover the government reduced the corporate tax in 2nd quarter, FY 2019-20 in order to boost up investment. In spite of these investment friendly policies there has been a decline in the investment growth in recent past.

Lower investment leads to slow growth in industrial and services sector. Almost all of the non agricultural sector has witnessed a decline in growth rate in FY 19-20. It should be noted here that manufacturing and construction, the two most people intensive sectors apart from agriculture, witnessed the lowest growth among all sectors. This has a detrimental impact on employment scenario. As per the Annual PLFS data released by the Ministry of Statistics & programme Implementation, the country witnessed the highest unemployment rate in 45 years. This lower investment makes the problem of unemployment more severe.

Thus it can be said that both the decline in growth of demand and investment are very much linked to each other and one is leading to the other. This is more alarming given it is a vicious circle.

As is shown, lower demand growth leads to lower profit and hence lower investments. Now lower investments will mean a decline in growth of industrial and services sector leading to lack of jobs in the economy which further leads to lower demand. So a holistic view needs to be taken given this linkage between the lack of growth of demand and that of investment.

Decoding the Performance of the Economy: During the COVID Phase

The economy was witnessing a decline in growth of demand leading to a drop in investment growth. With the advent of COVID, firstly the Indian economy got impacted by the slowdown in China as Indian manufacturing sector has huge dependency on raw materials imported from China. This lead a decline in IIP in the month of March, itself when lock down was there for only 7 days.

With the lockdown, the supply chain got impacted further. With complete stoppage or limited functioning of the economy, both the industrial and the services sector got grossly impacted leading to declining growth in these sectors. The only silver lining was agriculture.

Source: Ministry of Statistics & Programme Implementation (MOSPI), Government of India

The impact of the lockdown was most severe in people intensive sectors like in manufacturing, construction and Trade, Hotels, Transport, Communication & Services related to Broadcasting. With the people intensive sectors being impacted the most, we also saw a rapid increase in unemployment rate for the month of April and May. With the economy opening up there was some decline in the unemployment rate. Moreover there were reports of significant job cuts across levels as per Centre for Monitoring Indian Economy (CMIE).

The decline in supply and the resultant job loss has lead to further decline in demand which was already impacted in the pre COVID scenario. There has been a significant decline in private consumption demand in the first quarter of FY 20-21.

Source: Ministry of Statistics & Programme Implementation (MOSPI), Government of India

With the COVID cases on the rise, there has been a slow opening of the economy from the complete lockdown. Further there is a severe decline in demand. Both of these has lead to more uncertainties in the economy. And in uncertain economic environment, investment falls significantly. This is what is seen in the first quarter ( FY 20-21) numbers. The investment growth bears the major burn. With 87% of the economy seeing a significant decline, the overall growth also got impacted. Till the uncertainty prevails there is lesser chance of both investment and demand to grow. In terms of demand, people will tend to hold the money back in such uncertain environment. And with people not spending, there is lesser return to investments, leading to a drop in investment.

Future Outlook

Given this grim picture, what we can expect in the future. The economy has moved out of the stringent lock down. The unlock phase has seen gradual opening of the economy. Still the activity is not at 100%, but definitely higher than what was there in the first quarter. So while there is activity, yet it is less than the normal level. Various organisations has pegged the full year growth figures in the range of -10% to -12% .If we expect a scenario, where from the 2nd quarter onward the GDP value will remain similar to the last year, meaning no growth or fall in GDP for the 3 quarters in this financial year, then our growth will be -5.8% this financial year. This as of now remains the best case scenario.

But how do we get to the best case scenario. The only way is to address the uncertainty. This will require focus on both demand and supply side. That is the optimal way. What is required is

  • Universal basic income or some income guarantee policies will ensure that people will have more have more cash in hand and hence they will spend more leading to more profit for industries. This will bring in investment.
  • Host of infrastructural projects need to be undertaken. This will boost up the supply side.
  • Sufficient liquidity available in the market

The combination of the above measures will help break the vicious circle and will be able to address the steady decline in growth rate. There has host of steps taken to boost the credit and liquidity availability by the government and RBI. But lot needs to be done in the first two aspects. However these measures will mean a rise in government expenditure. The fiscal deficit in FY 19-20 has been 4.6%, higher than the budgeted target. The government needs to rationalize its spending and focus on measures to boost the demand along with boosting the investment. A balance needs to be maintained so that on one hand the fiscal deficit does not rise at an uncontrollable level and on the other hand measures are adopted to help the economy move out of the vicious circle.

Downward revision in India’s GDP growth estimates by Fitch Ratings

Fitch Ratings Inc. – the American credit rating agency has lowered its forecast for the growth of the Indian economy in FY 2020-21 and is now predicting a -10.5% contraction. This is lower than the -5% estimate released by Fitch in its June report. Last week, the Government of India announced the official economic estimates for Apr-Jun (Q1) 2020 and it was revealed that in light of the strict lockdown enforced for the COVID-19 pandemic, the Indian economy contracted by a whopping -23.9% in Q1 (Apr-Jun) in terms of year on year quarterly comparison – the sharpest recorded fall ever for the economy. Fitch has also revised the estimates for the global economy – marginally up at -4.4% from the -4.6% announced in June.

With the world reeling under the onslaught of the pandemic, all major economies barring China suffered contraction in the Apr-Jun quarter with India, UK, Spain and Mexico the worst sufferers.

Q-o-Q comparison of GDP growth: Apr-June vis-a-vis Jan-Mar (source: International Monetary Fund)

Fitch has announced that it expects the Indian economy to register a strong re-bound in Q3 (Oct-Dec) but with the pandemic still raging in the country, the revival of economic activities has been sluggish and interrupted, resulting in lowering of June estimates. India’s COVID-19 caseload now stands at 4.28 million (active cases 0.88 million) – second only to the USA – although it has the lowest deaths per million among the countries with top 10 caseloads. (Source: worldometers).

Fitch’s quarter-wise GDP growth projections for India in the rest of the FY are: -9.6% in July-Sep | -4.8% in Oct-Dec | 4.0% in Jan-Mar (21). India Ratings & Research, the Indian arm of Fitch Ratings, has meanwhile projected the Indian economy to contract at -11.8% in the current fiscal – revised downwards from -5.3% announced earlier. Fitch expects the Indian economy to clock 11% growth in FY 2021-22, primarily due to the low base of the current fiscal and 6% growth in FY 2022-23. Fitch anticipates the economy to reach pre-Covid levels in Jan-Mar (Q4) of 2022.

Earlier, Nomura also reduced its estimate for the Indian economy in the current fiscal to -10.8% from its earlier projection of -6.1%. It is believed that GoI is discussing another round of fiscal stimulus at present.

Suicides increase in India during 2019

Suicides in India grew by 3.4% in 2019 over the previous year, official data released by the National Crime Records Bureau (NCRB) showed. A total of 1, 39, 123 Indians committed suicide during 2019, compared to 1, 34, 516 in 2018. It amounted to on average 381 suicides every day – or one suicide every 4 minutes. The rate of suicide (incidence of suicide per 1 lakh population) went up by 0.2 percentage points in 2019 vis-a-vis 2018. It marks the 2nd consecutive year that rate of suicide has gone up after successive years of downward shift.

Rate of suicide (incidence per 1 lakh population) – source NCRB

The gender ratio among suicide victims in 2019 was approximately 70:30 for Males:Females. More than 2/3rd of male suicide victims (68.4%) were married while the same figure was 62.5% among female victims. Like last 3 years, in 2019 also, the top 5 states in terms of suicides were Maharashtra, Tamil Nadu, West Bengal, Madhya Pradesh and Karnataka with these 5 states together accounting for 49.5% of all suicides in the country during the year – down marginally from 51.0% share in 2018.

Top 5 states on no. of suicides (figure in parentheses indicates contribution to national total) – source: NCRB

Daily wage earners continue to be the biggest group by profession among suicide victims – up from 22.4% in 2018 to 23.4% in 2019. Suicides among farming sector dropped marginally – from 7.7% in 2018 to 7.4% in 2019. Among the farming suicides, farmer suicides were 5957 and agri-laborer suicides were 4324. Together, farming and daily wage earners accounted for ~31% of all suicides in 2019 – or 1 in every 3.

The World Health Organization (WHO) rates suicides as a “serious public health problem” which it considers “preventable” with timely, evidence-based and often, low-cost interventions. The WHO calls on all national governments to adopt a comprehensive, multi-sectoral suicide prevention strategy to tackle this challenge.

Q1 performance of the Indian economy

The Ministry of Statistics and Programme Implementation (MoSPI) has earlier today released the provisional estimates for the economy in the Q1 (Apr-Jun), FY 2021. The GDP for the quarter at constant prices (2011-12), has contracted by a whopping 23.9% (y-o-y) – the sharpest drop in the GDP ever recorded. The GDP at current prices in the year has witnessed a contraction of 22.6%. The quarterly Gross Value Added (GVA) at Basic Price at Constant (2011-12) has contracted by 22.8% while the GVA at current prices has shrunk by 20.6%. The GDP had registered a growth of 3.1% in the last quarter of FY20 (Jan-Mar).

The contraction of the economy in the first quarter of FY2021 was expected in line of the nation-wide lockdown imposed in the light of the COVID-19 pandemic. The government imposed a lockdown from midnight of March 24th, 2020 which brought practically all economic activity almost to a standstill across the country. Although the economic activities gradually started opening up through planned relaxations from 1st June, for majority of Q1 – the economy remained in a state of near suspension.

As per the government data, all key sectors except Agriculture, Forestry & Fishing witnessed contraction in the current quarter. The worst performance was observed in Construction and Trade/Hotels/Transport/Communication services. A summary of sectoral performance is given below:

Sector-wise performance – Q1 FY21 y-o-y shifts (source: MOSPI)

Contraction in growth was observed in most countries in the Apr-Jun period as an outcome of the pandemic.

GDP Annual Growth Rate – Time period quarter ending June’20 (Source: tradingeconomics.com)

With the pandemic continuing to rage in the country and economic activities still not running at optimum, experts remain unsure about economic revival in the rest of the year.

COVID 19 Spread : Status Update India as of August 22nd

There are over 23 million cases of COVID-19 in the world today with over 808697 deaths. In India there has been 3042450 ( covid19india.org) cases till 22nd August with 56846 deaths. Here is a summary of the situation in India.

ALL INDIA

Data Source: covid19india.org

There are over 454242 new cases in the week of 15th to 22th August with 35 states and Union territories impacted all across the country. The weekly growth rate declined fourth week in a row. There has been a 18% increase in the total number of cases in the week. During this week there has been a 14% increase in the total number of deaths from 50084 in the week ending on 15th August to 56846 in the week ending on 22nd August.

Data Source: covid19india.org

ndia has maintained a high recovery rate of 75% till August 22nd. This is higher than the world recovery rate of 68%. In terms of death rate, India has lower death rate as compared to the world death rate of 3.5%.

Data Source: covid19india.org

STATE LEVEL

Data Source: covid19india.org

Maharashtra, Tamil Nadu and Andhra Pradesh are the top three states and UTs in terms of the spread of COVID-19 cases. The three states together account for over 46% of all the cases in the country. Maharashtra alone contributes to 22% of all the cases in the country. Karnataka and Uttar Pradesh are the other two states in the top 5.

Data Source: covid19india.org

Both in terms of number of cases and number of deaths per million, India has lesser number compared to the world average. However there are 9 states in India which has higher number of cases per million than even the world average and there are 2 states which have higher number of deaths per million than the world average. Among the states with over 40,000 cases, Delhi, Andhra Pradesh and Maharashtra have highest number of cases per million Of them Delhi and Maharashtra not only have the highest number of cases per million but also highest number of deaths per million. Goa, Ladakh, Tamil Nadu, Puducherry, Andamn & Nicobar Islands and Karnataka are the other states/UTs apart from Maharashtra, Delhi and Andhra Pradesh which have higher number of cases per million than world average. In terms of number of cases per million, Bihar, Uttar Pradesh and Madhya Pradesh have the lowest number of cases among states with over 40,000 cases. Kerala , Bihar and Assam has the lowest number of deaths per million among states with over 40,000 cases.

Data Source: covid19india.org

Delhi, Haryana and Tamil Nadu are the top three states among recovery rate while Karnataka,Kerala and Punjab are the bottom three states among all the states which have over 40000 cases of COVID 19. Ten states have higher recovery rate than the national average.

Data Source: covid19india.org

Gujarat, Maharashtra and Delhi are the top three states in terms of death rate. Assam, Kerala and Bihar has the lowest death rate among all states with over 40000 cases of corona.

Data Source: covid19india.org

IPD constructs a treatment index as a ratio of recovery rate and death rate. Higher the value of treatment index, better is the position of the state in terms of treatment progress. Out of the states with over forty thousand cases, Assam, Kerala and Bihar are the top three stated in terms of treatment index. Gujarat, Punjab and Maharashtra are the states with lowest value of treatment index. Maharashtra which has the highest number of cases has a very low value of treatment index. This is an alarming trait. One silver lining is all states have higher treatment index than the world average.

CITY LEVEL

Data Source: covid19india.org

Over 34% of all the cases in the country comes from 10 cities in the country with over 45% of all the deaths. Another 9.6% comes from the next 10 cities with around 9.1% of all the deaths. So only 20 cities put together contribute to over 43.1% of all the cases in the country. The share of rest of India has been rising over weeks suggesting more spread of the virus.

Data Source: covid19india.org

There are over 30 cities in India which have a higher number of cases per million compared to the world average of 3000.Twenty eight cities have higher number of deaths per million than the world average of 104. Chennai and Pune are in the top 5 cities both in terms of number of cases per million and number of deaths per million. So utmost focus needs to given to control spread of the virus in these cities. The number of cases per million in Kamrup M, the top state is comparable to the 7th place country in the world in terms of number of cases per million. The same for Chennai is comparable to 10th place country in the world. Similarly Mumbai which has the highest number of death per million in the country is comparable to the 7th place country in the world in terms of number of deaths per million.

Data Source: covid19india.org

Delhi has the highest number of cases followed by Pune and Mumbai. Top three cities together account for 15.0% of the total cases in India. But 27% of all the deaths comes from these three cities. In the top 10 cities there are three cities from Maharashtra ( Mumbai, Thane, Pune), two from Andhra Pradesh ( East Godavari and Kurnool) one each from Tamil Nadu (Chennai), Telangana ( Hyderabad), Karnataka ( Bengaluru) and West Bengal (Kolkata).

In terms of death rate, Mumbai which has the second highest number of cases also has a very high death rate of 5.5%. Kolkata also has a higher death rate. Mumbai has significantly higher death rate than the world average.

Report on Key Economic Parameters of India: June-July 2020

India has been under lock down due to the COVID -19 pandemic since March, 25th, 2020. The lock down has been stringent for the first months with the first set of relaxations announced from April 21st, 2020. This lock down is expected to have severe impact on the economy. From May there has been gradual relaxations.

The Ministry of Statistics and Programme Implementation (MOSPI) , Government of India announced the IIP growth numbers and the Core sector growth figures for June on August , 10th and July, 31st respectively. Reserve Bank of India (RBI) has announced the sectoral credit growth numbers for June on July,30th. Centre for Monitoring Indian Economy (CMIE) is publishing the unemployment numbers in regular intervals. Let us examine how the Indian economy has been impacted by this lock down.

IIP and Core Sector Growth

Source: Ministry of Statistics and Programme Implementation (MOSPI), Government of India

Both the IIP and the Core sector witnessed negative growth in the month of June. However the extent of negative growth has seen a continuous decline for the last three months. However as compared to June, last year, both the IIP and core sector growth has been significantly lower. So while the economy has seen more activity in June compared to previous two months, it is still far away from normal and still sees a significant negative growth in the month of June also.

It needs to be noted here that in view of the preventive measures and announcement of nation-wide lockdown by the Government to contain spread of COVID-19 pandemic, majority of the industrial sector establishments were not operating from the end of March, 2020 onwards. Moreover the estimated of June 2020 are quick estimates and may be subject to change in subsequent months.

Source: Ministry of Statistics and Programme Implementation (MOSPI), Government of India

The growth of all the sectors showed some improvement with respect to the previous two months but continued to show a decline as compared to last year same month. Manufacturing sector, which is one of the most people intensive sectors showed significantly lower negative growth as compared to the previous two months. It needs to be noted here that manufacturing sector contributed to almost 80% of the total IIP.

Similar pattern is witnessed in terms of Core sector growth. Steel industry has witnessed the severest burnt in the stringent lock down month. Apart from the fertilizers sector, all other sector continued to show negative growth in June. It should we be noted that compared to the growth rate of May, all sectors apart from coal and fertilizer saw an improvement in growth rate in June. The COVID -19 pandemic has very less impact on rural India and hence agricultural activity continued to function since April, 21st. Given this there has been a need of fertilizer leading to higher production and hence positive growth in that sector. All other sector did not witness such stream of demand and hence continued to show a decline in growth.

Source: Ministry of Statistics and Programme Implementation (MOSPI), Government of India

CREDIT GROWTH

In order to combat the impact on economy due the pandemic induced lock down, the Government of India and the Reserve Bank of India announced an economic package. A sizable section of the economic package announced by the government and the central bank is targeted to provide more liquidity and credit in the economy. The first set of such policies was announced by RBI in March 28th and then again around mid April. Government of India announced such measures in mid May. Many economists believe that with lack in demand in the economy, there might not be a higher credit off take even after those measures. Let us examine what has been the scenario in terms of credit growth.

Source: Reserve Bank of India

The sectoral credit growth rate showed either a marginal decline or remained same in the month of May, 2020 as compared to the growth rate of April, 2020 for almost all the sectors. There has been an increase in growth rate in credit growth of industrial sector compared to the growth rate of previous two months. However when compared to July, 19 then all sectors witnessed a severe decline in credit growth. The decline has been severe for personal loan segment. The personal loan growth is a reflection of demand in the economy and a decline in this reflects lack of demand in the economy. However within the retail loan sector, there has been a surge in auto loan. There has been a considerable decline in all other type of retail loans.

As we see a surge in credit growth of industry sector from the previous two months, let us examine what is driving this. A host of credit measures were taken focusing on the small and medium enterprises. It needs to be noted here that both the micro and medium industrial sector which actually is a source of employment for vast majority witnessed a decline in credit growth. Only the large industrial segment witnessed a positive growth.

Source: Reserve Bank of India

The decline in credit growth for small, micro and medium sized industry segment has been more severe in June as compared to the previous months. The large industries have a higher growth in June. So the small, micro and medium industry sector which is one of the most people intensive sectors does not show a credit uptake at least till June During mid of May, a host of credit schemes targeting this sector has been announced by the government. However apart from the large industries, there is no significant impact of the measures at least till June. It remains to be seen how it impacts in the coming months.

Car and Two Wheeler Sales

Source: http://www.rushlane.com

Month of July has seen a significant growth in both car and two wheeler sales as compared to the previous month. This is a reflection of the fact that there has been significant surge in economic activity after unlock 1 starting from June, 1st. However the sales numbers of both cars and two wheeler has been significantly lower when compared to July, 19. So while there is signs of recovery in the month of July as compared to the previous three months, it is still much lesser than the pre-corona level. It needs to be noted here that both the car sales and two wheeler sales declined in previous financial year as compared to the earlier years.

Unemployment

The IIP figures and the credit growth numbers suggest slump in the manufacturing sector and small and micro enterprises. Both these sectors are people intensive sectors and can have severe impact on unemployment levels. However agriculture sector has been functioning. Moreover additional budget has been allocated to MGNREGA for ensuring more employment, Let us see what has been the impact of unemployment trends.

Source: CMIE

The unemployment rates had seen a record increase in the month of April and May. However with the unlock 1 starting from June, 1st, there has been a significant decline in unemployment rate in the month of June, 2020. It further declined in July. The unemployment rate for rural India is comparable with the unemployment rate one year back. But for urban India the unemployment rate in July, 2020 is still more than 100 basis points higher than that of July, 2019. The urban centers are still fighting with COVID and there are intermittent lock downs and restrictions.

It needs to be noted here that the unemployment levels in the pre-corona level has itself been in the higher side. The overall unemployment rate which stood at 2.3% in 2011-12 showed a record increase to 6.1% in 2017-18, highest in 45 years. This showed a marginal decline to 5.8% in 2018-19. So overall the unemployment rate which has been in a higher side sees a further growth given this pandemic.

Conclusion

The GDP growth numbers for first quarter ( April- June) FY 2020-21 is supposed to be announced end of August. Given the negative growths in IIP and core sector growth and also a decline in credit growth mainly in the retail sector, it is highly likely that the first quarter GDP growth will be negative. IPD forecasts it to be between -4% to – 6%. The economic activity are slowly rising in the country which is reflected in the decline in the extent of negative growth of IIP and core sector growth over last three months. So over time economy will slowly show signs of moving to a positive growth trajectory. However how fast this will happen will depend on the spread of the disease which may lead to further lock downs. Indian economy witnessed a slowdown since FY 18-19. Now the pandemic induced lock down has has got added over this. It is of utmost importance to constantly monitor the economy and take effective actions and policies.

COVID 19 Spread : Status Update India as of August 8th

There are over 19 million cases of COVID-19 in the world today with over 729586 deaths. In India there has been 2152020 ( covid19india.org) cases till 18th July with 43453 deaths. Here is a summary of the situation in India.

ALL INDIA

Data Source: covid19india.org

There are over 399849 new cases in the week of 2nd to 8th August with 35 states and Union territories impacted all across the country. The weekly growth rate declined second week in a row. There has been a 23% increase in the total number of cases in the week. During this week there has been a 16% increase in the total number of deaths from 37408 in the week ending on 1st August to 43453 in the week ending on 8th August.

Data Source: covid19india.org

India has maintained a high recovery rate of 68% till August 8th. This is higher than the world recovery rate of 64%. In terms of death rate, India has lower death rate as compared to the world death rate of 3.7%.

Data Source: covid19india.org

STATE

Data Source: covid19india.org

Maharashtra, Tamil Nadu and Andhra Pradesh are the top three states and UTs in terms of the spread of COVID-19 cases. The three states together account for over 46% of all the cases in the country. Maharashtra alone contributes to 23% of all the cases in the country. Karnataka and Delhi are the other two states in the top 5.

Data Source: covid19india.org

Both in terms of number of cases and number of deaths per million, India has lesser number compared to the world average. However there are 9 states in India which has higher number of cases per million than even the world average and there are 2 states which have higher number of deaths per million than the world average. Among the states with over 20,000 cases, Delhi, Andhra Pradesh and Maharashtra have highest number of cases per million Of them Delhi and Maharashtra not only have the highest number of cases per million but also highest number of deaths per million. Goa, Ladakh, Tamil Nadu, Puducherry, Andamn & Nicobar Islands and Karnataka are the other states/UTs apart from Maharashtra, Delhi and Andhra Pradesh which have higher number of cases per million than world average. In terms of number of cases per million, Bihar, Uttar Pradesh and Madhya Pradesh have the lowest number of cases among states with over 20,000 cases. Kerala , Bihar and Assam has the lowest number of deaths per million among states with over 20,000 cases.

Data Source: covid19india.org

Delhi, Haryana and Tamil Nadu are the top three states among recovery rate while Karnataka, Uttar Pradesh and Andhra Pradesh are the bottom three states among all the states which have over 20000 cases of COVID 19. Nine states have higher recovery rate than the national average.

Data Source: covid19india.org

Gujarat is the only state in India which has a death rate higher than the world average. Gujarat, Maharashtra and Delhi are the top three states in terms of death rate. Assam, Kerala and Bihar has the lowest death rate among all states with over 20000 cases of corona.

CITY

Data Source: covid19india.org

Over 38% of all the cases in the country comes from 10 cities in the country with over 53% of all the deaths. Another 9.4% comes from the next 10 cities with around 7.0% of all the deaths. So only 20 cities put together contribute to over 47.6% of all the cases in the country. The share of rest of India has been rising over weeks suggesting more spread of the virus.

Data Source: covid19india.org

There are over 30 cities in India which have a higher number of cases per million compared to the world average of 2541.Twenty one cities have higher number of deaths per million than the world average of 94. Chennai, Mumbai and Pune are in the top 5 cities both in terms of number of cases per million and number of deaths per million. So utmost focus needs to given to control spread of the virus in these cities. The number of cases per million in Chennai, the top state is comparable to the 10th place country in the world in terms of number of cases per million. The same for Kamrup M is comparable to 12th place country in the world. Similarly Mumbai which has the highest number of death per million in the country is comparable to the 9th place country in the world in terms of number of deaths per million.

Data Source: covid19india.org

Delhi has the highest number of cases followed by Mumbai. Both cities together account for 12.0% of the total cases in India. But 25% of all the deaths comes from these two cities. In the top 10 cities there are three cities from Maharashtra ( Mumbai, Thane, Pune), one each from Tamil Nadu (Chennai), Telangana ( Hyderabad), Gujarat ( Ahmedabad), Karnataka ( Bengaluru), West Bengal (Kolkata) and Andhra Pradesh (East Godavari).

In terms of death rate, Ahmadabad has been leading with over 5.9% death rate. Mumbai which has the second highest number of cases also has a very high death rate of 5.5%. Kolkata is the third city which have a death rate. Both Ahmadabad and Mumbai have higher death rate than the world average.

July brings much needed cheer for India’s 2-wheeler and Passenger Vehicle businesses

The nation wide lockdown imposed in the last week of March, 2020 in response to the Covid-19 pandemic brought businesses across the country to a near standstill. The situation made matters worse for the automobile segment which had already suffered it’s worst year in nearly two decades in 2019. Sales hit near blank in April with showrooms closed and remained very low even in May. Some positive movement was observed in June with the lockdown gradually eased. Now, July has finally brought some cheer for India’s 2-wheeler and passenger vehicle (PV) makers with all major players registering growth over June. However, in a stark reminder of the severe economic blow of covid-19, year-on-year figures remain in the red for all top 2-wheeler manufacturers and also for many of the PV OEMs.

Snapshot of 2-wheeler segment:

Sales in no. of units (source: carandbike.com, rushlane.com)

As can be observed, all the major players have taken a major hit in July sales compared to same period a month ago with market leader Hero Moto Corp having the best performance. With the pandemic still raging, people are wary of using public transport and this has had a major effect on the boost in sales from last month especially for the top 3, according to experts.

Snapshot of Passenger Vehicles segment:

(Sales in no. of units; source: autocarindia.com, rushlane.com)

In the passenger vehicle segment, it has been bit of a mixed-bag scenario. In an encouraging development, market leader Maruti Suzuki India has been able to register a small positive movement y-o-y while no. 2 Hyundai Motors coming close to matching last year July sales. Both have registered bumper growth vis-à-vis last month. TATA Motors and Renault had strong showing compared to same period last year, albeit on a smaller base. New entrants like MG India and KIA Motors continued their positive movement. Mahindra, Toyota, Honda and Ford witnessed sharp de-growth y-o-y although all had significantly better nos. compared to June.

Conclusion: With economic activities getting further relaxations in August, it is hoped that the automotive sector will be able to maintain its positive momentum in the current month as well.