Q2 GDP growth may break economic gloom: SBI says businesses show pick up in August

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September 3, 2020 2:34 PM

While India reported a major dive in GDP with Q1FY21 results shaking even the best of the optimists, it is likely that Q2 economic growth bring some cheer.

nitin gadkari, sme, msme, industry, sector, microfinance facility, economic revivalThere has been a pick up in August in certain activities which are crucial indicators of business in the country.

While India reported a major dive in GDP with Q1FY21 results shaking even the best of the optimists, it is likely that Q2 economic growth bring some cheer. There has been a pick up in August in certain activities which are crucial indicators of business in the country. “High frequency indicators such as labour participation rate, Google mobility index (workplace), Apple mobility Index, RTO revenue collection, retail payments and electricity daily maximum consumption as variables, show pick up in August,” according to SBI’s Business disruption index which takes into account the above mentioned indicators, a report said on Thursday.

With the government allowing reopening of the economy gradually, businesses activities have started to pick up. Further, rail freight earnings have risen after unlocking the economy. “Freight Earnings account for around 65% of the gross traffic receipts of Railways with passenger freight accounting for the remaining,” the report said. As the country has now recently entered Unlock Phase 4, with many restrictions lifted in the previous phase as well, the sales of cars have also picked up. Citing data from Maruti, one of the biggest car makers in India, the report said that a segment wise sales of Maruti indicates significant growth in Mini and compact category of cars. This is hinting at more people avoiding public transport to go to the workplace.

However, several concerns still abound regarding labour participation rate, decline in credit growth to MSME, and weekly food arrivals. According to a separate report by Anand Rathi released on Wednesday, credit for India’s micro, small and medium enterprises (MSMEs) fell in July 2020 as compared with the same month last year. The same is indicative of business activities which also reflects on economic health. Further, the labour participation rates have stumbled in August 2020 from last month figures. “The decline in Labour force participation rate is a matter of concern as it indicates a large percentage of labour is still wary of returning to work given the spread of pandemic,” the SBI report said. Moreover, the combined amount of SGST, allocated IGST and cess also stands 33% lower than last year’s collection in the same period.

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