As NIBRI crosses 100, reading the signals

The Nomura India Business Resumption Index (NIBRI) has crossed 100 (pre-pandemic base) for the first time since the beginning of the pandemic. NIBRI, which has emerged as one of the most popular high-frequency indicators of economic activity in the post-pandemic period, is based on Google mobility indices, driving mobility from Apple, power demand, and the labour force participation rate. There are three key takeaways of NIBRI crossing 100 in the week of August 15.

One, vaccinations are crucial to restore economic activity. The V-shaped recovery in NIBRI after the second wave would not have been possible without vaccines. As of August 15, India has given at least one jab to 427 million people out of the estimated 940 million adults. The pace should have been better, but the scale isn’t insignificant. As people get vaccinated, economic activity will resume.

Two, partial lockdowns are preferable to blanket lockdowns from an economic point of view. The second wave was far more severe than the first. The fact that the Centre did not impose a hard lockdown like the 68-day phase beginning March 25, 2020, ensured that the economy did not suffer like last year. This is an important lesson to remember in case of a third wave. And finally, NIBRI crossing 100 should not make us complacent. NIBRI is not meant to capture challenges such as weakness of aggregate demand. This newspaper has consistently argued that lack of demand is the binding constraint on the economy regaining its momentum. Fiscal policy must do all it can to address this challenge to prevent any further damage to the economy.