India's road to recovery gets bumpier in July, thanks to local lockdowns

NEW DELHI: The economy did not gather pace in July after the June spurt amid rising Covid-19 cases and local lockdowns to contain the spread, bending back the recovery trend. Transportation of goods, rail freight, exports, car sales, farming and employment indicators improved further in July from June levels, but retail remained sluggish, credit growth was lower, diesel demand fell and mobility indicators did not suggest increased activity in the month.
Experts called for another fiscal stimulus to prevent the economy from slipping again as states imposed restrictions due to rising Covid cases.

Goods and services tax (GST) collections for July, which included payments for earlier months because of relief given by the government, amounted to Rs 87,422 crore, short of Rs 1.02 lakh crore in the year earlier. GST collections are seen as a key indicator of consumption demand.

'Mitigate uncertainties'
Google's Mobility Reports showed that people movement across locations was stagnant in June and July. In restaurants, cafes and shopping centres, it remained at 56% below normal, while in grocery stores and pharmacies it stayed at 6% below normal. Activity at transit stations such as bus, airports and train stations was at 33% below normal and 39% below normal at workplaces for both months.

"It is imperative that we have a fiscal package 2.0 since that first one was more about liquidity support," said Ajit Ranade, president and chief economist, Aditya Birla Group. The government had announced a Rs20-lakh crore programme aimed at reviving the Covid-hit economy.

The Confederation of Indian Industry (CII) called for a dashboard approach to keep a close watch.

"Early signs of recovery need to be nurtured by mitigating any uncertainties regarding restrictions on economic activities," said CII director general Chandrajit Banerjee.

The pent-up demand due to the lockdown that sustained demand in June may have dwindled.

"Biggest challenge is that job losses happening now will be very difficult to come back from as certain segments of consumption at the top level may be muted for a longer time," said Indranil Pan, chief economist at IDFC First Bank. He said some of the buoyancy seen was due to that pent-up demand, which may not sustain.

Ups and downs
Last month, 38.8 million e-way bills were generated until July 26, higher than 34.1 million generated for the first 26 days of June. These e-way bills are needed for transportation of goods over Rs50,000 in value.

Demand for work under Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS) dropped 59.3% to 260.4 million persondays in July, compared to 636.1 million persondays in June.