Unlike the first wave, when the state’s largest economies lagged behind the rest of the country in recovering from the initial pandemic shock, they recovered at a rate similar to that of other states this time around. Almost all states were hit hard by Wave 2, and nearly all experienced a similar upturn in economic activity in June after experiencing a sharp contraction in May.

Among the fastest to recover are two large state economies – Uttar Pradesh and Gujarat – which suffered the brunt of the pandemic in April – but have seen a drop in cases and a sharp rebound in economic activity since then.

Karnataka and Tamil Nadu reported the lowest numbers, according to the Mint State recovery tracker. Most southern states have seen cases increase with a lag, imposed lockdowns with a lag, and are now experiencing a relatively slower recovery. The Mint State Recovery Tracking examines three high-frequency economic indicators – electricity consumption, vehicle sales, and mobility levels – to track the performance of the states’ largest economies (those that account for minus 4% of gross domestic product or GDP of India). Medium-sized (2-4% of India’s GDP) and small (1-2% of India’s GDP) economies are aggregated for this analysis.

Economy activated

The overall outlook improved in June not only because the number of covid-19 cases and deaths fell dramatically, but also because the vaccination rate improved, raising hope and feelings among consumers. However, vaccination rates still vary widely across the country, with large populated states such as Bihar and Uttar Pradesh lagging far behind.

Nationally, mobility levels rose 24 percentage points in June after falling to a 12-month low in May, reaching levels last seen in October and November. The annualized decline in electricity use from pre-pandemic levels was smaller in June than in May. Vehicle sales after collapsing last month have rebounded sharply, with 1.2 million registrations in June from around half a million in May. To compare electricity consumption and vehicle registration, a two-year period is considered, with June 2019 as the reference period. This is to avoid the artificially depressed base of 2020.

Although vehicle sales rose sharply sequentially in June, the numbers were still 15% lower than in the same period two years ago. Karnataka, with an annualized decline of 51%, was the worst on this indicator, followed by Kerala (40%) and Tamil Nadu (39%). Uttar Pradesh was the only state to experience annualized growth, albeit only 1.1%. Small and medium states performed better than large states. Energy use has declined 1.4% on an annualized basis since June 2019, lower than the 4.7% drop in May. Gujarat (-1.3%) recorded the smallest decline in June, followed closely by Rajasthan (-1.4%).

Upward mobility

As restrictions were relaxed across all states, mobility levels that had fallen to about half of pre-pandemic levels by mid-May rose to 81% of normal levels by the end of June. Among the large states, Uttar Pradesh (94%) and Madhya Pradesh (88%) recorded the highest levels of public mobility.

Several districts in northern and central India are already experiencing public mobility above pre-pandemic levels, Google data shows. States like Bihar, Himachal Pradesh, Chhattisgarh and Uttarakhand had particularly high levels of mobility. While this could translate into a faster rebound in economic activity, it could also suggest widespread complacency, even in states where immunization coverage has so far been limited.

Large parts of Odisha and the northeast, which still report higher numbers of cases, have seen their mobility reduced. Visitors to public spaces were also relatively lower in southern India, where state governments were slower to lift curbs. Unlike last year, the six largest state economies – Maharashtra, Tamil Nadu, Uttar Pradesh, Gujarat, Karnataka and West Bengal – which contribute more than 50% of India’s economic output, recorded performance comparable to that of the rest of the country.

The ability of states to contain the pandemic while relaxing movement restrictions, and the country’s ability to immunize all sections of the population in all parts of the country will be key to a sustainable recovery. The current pace of vaccination does not suggest that the year-end goal of vaccinating all adults will be met, leaving the country vulnerable to a devastating third wave.