NEW DELHI - - India is now better than before the start of the COVID – 19 pandemic, an index that was compilated by Nomura Singapore shows, as the South Asian country overcomes a massive outbreak that brought its health system to its knees earlier this year.
However, chip and energy shortages are beginning to impact India's manufacturing sector, casting shadows over the path to a full recovery. Farmer protests could both bring momentum back after a coronavirus-induced lull and can also lead to widespread supply chain disruptions.
The Nomura Indie Business Resumption Index has topped the prepandemic level of 100 - - established by mid-August in late February 2020 for nine straight weeks, reaching a new high of 105 in mid-October. The Index tracks such factors as movements of goods and people, labor force participation rate, and electric demand.
A recovery of movements of goods and people contributed significantly, according to Sonal Varma, Nomura's chief economist for India and Asia ex Japan.
Consumer spending and services remain relatively slow, but the economy will recover more slowly in the next 12 months, said Smith.
With the spread of new contagious variants of the virus behind COVID - 19 India hit a global record of 410,000 - plus daily new cases in early May. An acute shortage of hospital beds and medical oxygen forced a state to lock down its health care system, and many regions were forced to evacuate.
But recent progress with vaccine has dramatically slowed the spread. We have no more than 20,000 new daily cases, and economic activity is shrinking.
The index of industrial production rose 11.9% to the year in August. Goods and services exports together jumped 21.4% on the year in September, with coffee and minerals and jewelry faring well. Meanwhile, the consumer price index is up 4.3% in the year that month, falling below the target of 6% set by the Reserve Bank of India.
The RBI expects the real gross domestic product to grow 9.5% for the fiscal year ending March 2022, bouncing back from the 1991 reported drop of 7.3% by coronavirus the year before.
Still, uncertainty looms large over India's hopes for a full recovery in the economy.
The country has been hit especially hard by the global semiconductor shortage, as its manufacturing sector is relatively weak and cannot make up the shortfall on its own. Maruti Suzuki India, the nation's largest automaker, about halved its output on the month of September due to a lack of chips.
The possible energy crunch is further causing concern. India relies on coal for approximately 70% of its electricity, much of it mined at home. While demand for energy surges with the economy reopening, coal inventories at Indian power plants are at a low record level, attributed partly to heavy rains in September. Certain parts of the country, like the northern state of Punjab, are already experiencing power outages.
In addition, farmer protests are regaining steam to be inspired by new legislation to liberalize the agricultural sector. The demonstrations began in November late 2020 and had quieted down around April and May amid the surge in COVID - 19 cases. Farmers are however, once again picketing highways around New Delhi and elsewhere, and prolong protesting could impact India's supply chains.