Too soon to cheer: Recovery, but a slow one

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November 23, 2020 8:00 AM

With the services sector yet to see a meaningful uptick — sectors such as hotels, restaurants, aviation and retail remain sluggish — the year could end with significant job losses.

Also, corporate India’s Q2FY21 profits were impressive, for a large number of companies came on the back of steep fall in costs rather than higher revenues.Also, corporate India’s Q2FY21 profits were impressive, for a large number of companies came on the back of steep fall in costs rather than higher revenues.

While the economy is no doubt recovering from the lows of the April-June period and the festive season would have spurred consumer spends, there are no indications yet the momentum will sustain after December. With the services sector yet to see a meaningful uptick — sectors such as hotels, restaurants, aviation and retail remain sluggish — the year could end with significant job losses.

Analysts at Nomura say business resumption plateaued in the week to November 15 and was trending at 15 pps below pre-Covid levels. Indeed, some part of the ramp-up in production in consumer durables can be attributed with low stocks at dealers that needed to be replenished.

Also, corporate India’s Q2FY21 profits were impressive, for a large number of companies came on the back of steep fall in costs rather than higher revenues. If the sum of operating profits and wages (a proxy for GVA) is showing an increase whereas GDP is set to contract by about 8-9% in this period, it means the informal sector is in poor shape.

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