GRIM ECONOMIC OUTLOOK

MARCH SAW JUST 10 DAYS OF THE LOCKDOWN DUE TO COVID-19, and lead indicators point at the weakening economic activity.

The crucial eight-industry core sector output fell the sharpest in the new series in the month (chart 1). This is likely to have a dampening impact on the index of industrial output (IIP), which will be released on May 12. The purchasing managers' index (PMI) for manufacturing did not contract but was the lowest in four months (chart 2). The figure to be released on Monday will tell a grimmer story ahead as many vehicle manufacturers, including Maruti Suzuki India and MG Motor India, reported zero sales in the domestic market.

PMI'S services did contract, with trade, hospitality coming to a grinding halt, though the pace of fall in the index was not as steep as that of the core sector (chart 3). April data would show the real position. With the external world facing the same situation and even worse in some markets, exports declined the sharpest since 1994-95 (chart 4).

However, the situation on the external account is not as worrisome due to the fall in global oil prices and many economists expect small surplus or minor deficit in the current account balance in Q4 of FY20.

The demand for petrol in the domestic market reflected the same trend. As economic activity came to a virtual halt, the consumption of petrol fell in the month, for the first time in 2019-20 (chart 5).

The effect of lockdown was evident on power demand as well with the industry not allowed to work except for essential goods. The demand never rose since March 22, year on year. It was falling on earlier days of the month as well, but it was not a secular decline (chart 6).

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