With no immediate signs of flattening of coronavirus curve, India has been grappling with ways to contain the pandemic as it now spreads towards rural areas. India has crossed the 2 million mark in terms of number of coronavirus cases and has the highest daily rate in the world. This, combined with some other factors, has put a negative impact on the economic recovery, which has plateaued in the last few weeks, a report by HSBC Global Research said.
"The momentum in the economic recovery has lost some steam since July as pent-up demand over May and June has begun to fizzle, risk aversion amongst households has risen, and local (coronavirus) lockdowns have proliferated. That said, certain pockets of the economy are doing better than others," the report said.
However, with the number of COVID-19 cases per million and the mortality rate remaining low, there are signs of encouragement in terms of economic recovery, it said. In addition, agriculture continues to remain a bright spot in the economy facing stress due to coronavirus pandemic.
"Sowing activity has been strong, supported by the normal monsoon and healthy reservoir levels. That said, the more urban-centric activity indicators remain relatively weak. Workplace mobility has not just weakened, but it has also become more volatile (arguably reflecting the rise in local lockdowns)," it said.
The report added that both manufacturing and services have remained weak. PMI and job listings data show that services remain the weakest link of the economy.
Interest rate transmission
HSBC said that monetary transmission has improved, but some pockets remain starved. "Assisted by surplus liquidity, financial conditions have indeed eased across the money, corporate bond and Gsec markets. That said, the transmission to the periphery (lower rated NBFC and corporate bonds) remains wanting and credit growth remains weak," it said. The RBI has already reduced the repo rate by a total of 115 basis points since February. In its last outing earlier this month, the key rates were kept unchanged.
Meanwhile,India recorded a single-day surge of 53,601 coronavirus cases and 871 deaths in the last 24 hours. The coronavirus tally has now spiked to 22,68,676, including 6,39,929 active cases, 15,83,490 recoveries and 45,257 deaths, according to the latest Ministry of Health data. In total, India has around 28.21 per cent active COVID-19 cases, 69.80 per cent cured and 1.99 per cent deaths. India has so far conducted 2,45,83,558 tests, of which 4,77,023 were done on Monday alone, according to the ICMR data.