Business is picking up, services are also catching up, according to Nomura

The Nomura India Business Resumption Index (NIBRI) hit a new high of 126.4 for the week ended March 20, from 122.8 the previous week. The recovery in business activity has been widespread as the nationwide reopening has helped services catch up quickly, Nomura said in a note on Monday.

The NIBRI was about 26.4 percentage points above its pre-pandemic levels. The financial services firm said it was too early to tell, but “the impact on growth from the ongoing war appears to be limited so far.”

“The domestic reopening is helping services catch up quickly while consumers have been shielded from rising global crude oil prices as retail pump prices have been frozen since early November,” he said.

Google Workplace Mobility was up 2.4pp, Retail & Leisure was up 3.1pp, and Apple’s Driving Index was up 11.7pp from the previous week, all mobility indicators being higher than their pre-pandemic levels. The labor force participation rate stood at 39.3% on March 20, compared to 39.0% the previous week, while electricity demand increased by 1.8% from a week to week (Sa) versus 2.1%. NIBRI takes into account Google Mobility Indexes, Apple Driving Index, Power Demand and Labor Force Participation Rate. Mobility indices are based on a seven-day moving average. The pre-pandemic level of February 23, 2020 is indexed to 100 and considered the basis for comparisons. The index is now 15.8 percentage points (PP) above the pre-pandemic level.

Inflation concerns

Nomura raised concerns about the inflationary impact of the Ukraine-Russia conflict, saying he expected it to dominate GDP growth.

“A widespread spike in food energy costs and a narrowing output gap will likely keep consumer price index-based inflation above the RBI’s target (2-6% ) in 2022,” he said. Nomura’s projection is 6.3%. The note warns that if domestic fuel prices remain unchanged, a higher fiscal burden (on-budget or off-budget) and a higher import bill are also likely (due to limited demand rationing).

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