Broader, stronger economic revival in September: ICRA

Economic revival broadened and strengthened in September with about nine non-financial leading indicators recording growth during the month while five such indicators narrowed their contraction, according to rating agency ICRA.
“The recovery in GST e-way bills, electricity, petrol and diesel in September 2020 provides a meaningful signal of a broader economic revival,” said Aditi Nayar, principal economist at ICRA, adding, “The improvement in some of the other indicators, such as auto output, reflects a combination of pent-up demand, healthy rural sentiment, and inventory build-up, ahead of the upcoming festive season.”

However, the agency cautioned that the sustainability of the upturn may not be universal as the momentum could subside beyond the festive season.

Generation of GST e-way bills, an indicator of inter and intra state movement of goods and services, grew 9.6% annually in September in comparison to a 3.5% contraction in August, ICRA said in a note on Tuesday.

Electricity generation also sported a turnaround to 4.2% year-on-year growth in September against a 3.3% contraction in the previous month, reflecting broader recovery and a favourable base effect, it said.

Similarly, aggregate auto production recorded an expansion of 11.7% in September, after a sustained annual contraction for the previous 22 months, the note said.

However, the situation at the retail level was less positive with vehicle registrations remaining below pre-Covid levels for that month across most auto segments, it added.

One outlier showing a sharp year-on-year increase of 31.6% in September was output from Coal India Ltd (CIL), ICRA said. This was attributed to a favourable base effect as output dropped to -23.5% last year due to heavy rains, it said.

“This trend may persist in the coming one-to-two months, before settling at more sedate levels after the festive season is over. Sharp favourable base effects have contributed to the high performance of some outliers, such as the output of Coal India Limited (CIL), which are likely to be unsustainable,” Nayar said.


Further, ICRA remained cautious of improvements in non-oil merchandise exports in light of fresh waves of Covid-19 emerging in many trading partners.

While forecasting India’s GDP contraction to narrow to 11-12.5% in the second quarter of the fiscal, ICRA said it was awaiting signs of durability in the nascent upturn of September.