2 High-frequency indicators suggest a staggered demand side damage because of the second wave

While GDP numbers come with a significant lag and are likely to be revised further during the course of the year, many high-frequency indicators can tell us about the state of economic activity in the first quarter of the current fiscal year.

The Nomura India Business Resumption Index (NIBRI) has emerged as among the most popular high-frequency indicators of economic activity in the post-pandemic period. NIBRI comprises Google mobility indices, driving mobility data from Apple, and details of power demand and the labour force participation rate. The NIBRI series considers February 23 2020 as the base and subsequent data entries have been indexed to it.

NIBRI started losing momentum in the March quarter itself and fell sharply as the second wave of Covid-19 cases gained momentum. NIBRI’S lowest value in the June quarter was 60.3 in the week ending May 23. It recovered to 86.3 by the week ending June 27. NIBRI’S all-time low was in the week ending April 26, 2020, when it fell 44. It recovered to 70.5 by the week ending June 28, 2020.

The fact that the second wave led to a smaller fall in NIBRI compared to the first wave is good reason to believe that economic activity did not suffer as much. However, when seen with the fact that RBI’S MPC has made a downward revision in its growth forecasts for the remaining three quarters of the year, even though NIBRI has shown a V-shaped recovery and has already crossed 100, suggests that the second wave’s economic impact might manifest more on the demand side rather than supply side – and perhaps with a lag.