Slackening recovery overshadows sharp base effect-driven growth in April: Icra

India’s slackening recovery momentum overshadowed the sharp base effect in April as the second wave of Covid-19 surged through the country causing localised restrictions across states, according to ratings agency ICRA.

While a majority of leading economic indicators showed annual growth due to a massively shrunken base in April last year, most of them were lower than pre-Covid levels, the agency said in a report on Wednesday.

“Notwithstanding the base effect-led spike in growth of many sectoral indicators in April 2021, the slackening momentum, driven by the second wave of Covid-19 infections in India, has emerged as a concern,” the report said.

The Indian economy saw a massive 24.4% contraction in the April-June quarter of the previous fiscal on account of the pandemic-induced nationwide lockdown.

About 14 of the 15 indicators tracked by ICRA improved in April with substantial gains seen in automobiles output, vehicle registrations, non-oil merchandise exports, and Goods and Services Tax e-way bills.

“However, the optimism generated by this trend is limited, as eight of the 13 non-financial indicators in April 2021 remained below their pre-Covid, i.e. April 2019 levels,” said Aditi Nayar, chief economist at ICRA.

This subset included domestic airlines’ passenger traffic, vehicle registrations, auto output, consumption of petrol and diesel, as well as the output of Coal India Limited.

Further, indicators like GST e-way bills, electricity generation, vehicle registrations and rail freight traffic displayed a slowing sequential momentum in April 2021, reflecting the rise in Covid-19 cases and imposition of localised restrictions, the report said.

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