Where are the early signs of economic recovery?

The easing of lockdown restrictions in June and July have led to an uptick in economic activity. Some of the high-frequency indicators like agriculture, tractor sales, trade surplus, and FMCG have shown growth despite growing coronavirus cases. Though India's economy has been hit the hardest due to prolonged lockdown spanning over four months, some sectors have held the fort. Echoing similar views, Finance Minister Nirmala Sitharaman, during the recently-concluded 2020 India Ideas Summit, said "the green shoots are (visible) based on high-frequency indicators... we will watch them as we go along".

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Let's take a look at some high-frequency indicators to track India's economic health post the lockdown.

Agriculture sector

The bright spot in the shrinking economy amid COVID-19 ripple is the agriculture sector. The sector has performed exceptionally well on the back of good Rabi and Kharif crop harvests, and better than expected monsoon. Agri experts suggest bumper crop this year could even create a glut in the agricultural markets. Former Reserve Bank Governor D Subbarao, in a webinar organised by economic think-tank NCAER recently, also said the government must build on "some silver linings" in the farm sector to speed up the economic recovery.

Unemployment rate

India's unemployment rate fell significantly to 10.99 per cent in June compared to 23.48 per cent in May, showing signs of improvement in the job scenario in the country and return to the pre-lockdown period, the Centre for Monitoring Indian Economy (CMIE) data suggests. The unemployment rate in urban areas for the month stood at 12.02 per cent, while it was recorded at 10.52 per cent in rural areas. Notably, India's unemployment rate was recorded at the highest since January at 25.52 per cent after the government announced nation-wide lockdown with strict measures on March 25. April saw the unemployment rate of 23.48 per cent as most of the economic activity remained subdued. The employment rate in March was recorded at 8.75 per cent, while it remained 7.22 per cent and 7.76 per cent in January and February.

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FMCG companies

FMCG consumption is almost back to pre-COVID levels, according to Nielsen's latest edition of 'COVID-19 Consumer Evolving Trends' report. It says the FMCG value sales index that was at 100 in March, before the lockdown, dipped to 75 during April and May. However, June saw a revival with the index touching 98, just a few points lower than the value in March. The recovery has been faster in rural India, which grew from 84 points in April and May to 109 points in June. Rural markets in June saw higher growth than the pre-COVID days in March (103). FMCG consumption in the urban markets was at 100 pre-COVID, which dipped to 70 during April and May and bounced to 94 in June.

Consumer durables

The consumer durable and appliances segment has also shown steadiness in trying times. Most leaders in the segment, including Panasonic India, Godrej Appliances and Philips India, recorded growth in sales, mainly driven by a surge in demand for home appliances, washing machines, television sets, and personal appliances as people remained locked at their homes. For example, Panasonic India recorded 20per cent growth in sales of vacuum cleaners; and 44per cent in microwaves and washing machines sales compared to the pre-COVID-19 levels. Godrej Appliances saw record sales (up to five-fold) in kitchen alliances like microwaves and dishwashers while Philips India and Panasonic India saw significant uptick in personal alliances sale for the month.

Two-wheeler and tractor sales

Though India's passenger vehicle sales fell 49.59 per cent in June, tractor and two-wheeler sale across hinterland have touched pre-COVID levels, with top manufacturers like Hero MotoCorp and Mahindra & Mahindra recording uptick in sales. Mahindra's recorded 47 per cent jump in month-on-month sales to 35,844 units in June compared to 8 per cent in the same period last year. Hero, however, sold 450,744 units, four-fold rise in month-on-month sales. Recovery can be attributed to boost in cash flows in the rural areas due to good rabi harvest, expected bumper kharif production, good rainfall and welfare transfers to migrants and farmers by the government.

Rupee Vs Dollar

The Indian rupee gained 6 paise to trade at 74.78 against the American dollar in early deals on Wednesday tracking weakness in the greenback. The local currency was trading in a narrow range at the interbank forex market, ahead of the outcome of US Federal Reserve's policy today. The value of rupee against dollar was Rs 77 on March 25, the day the government announced the nation-wide lockdown.

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India's food exports

India's food exports have risen 27 per cent since March, despite COVID-19 restrictions in place. The growth has been primarily attributed to high demand for food-based items. Overall, India emerged as the net exporter in June, recording trade surplus of 0.79 billion compared to $15.28 billion deficit in the same period last year. As per ASSOCHAM, India's spices recorded 23 per cent growth in June to $359 million as against $292 million in the same month last year.

Trade surplus

For the first time in the past 18 years, the economy recorded the first-ever trade surplus in June since January 2002. India's merchandise exports for the month fell 12.4 per cent, while imports shrunk 47.6 per cent, showing a cumulative trade surplus of $790 million, thereby indicating increased employment and economic growth recovery. Comparatively, the trade surplus was $3.15 billion in May and $6.8 per cent in April.

PC shipments

As many as 2.9 million desktops, notebooks, tablets and workstations were shipped during April-June period despite lockdown for most of the period and just 45 operational days, according to research firm Canalys. Lenovo was the market leader with 818,000 PCs. HP with 629,000 units shipment was at the second spot. However, the PC industry has been on a decline for the last few years and this recent boost in PC sales may not be enough to change the industry dynamics, say experts.

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