The economic recovery broadened in Q3; sustainability remains elusive: Icra
NEW DELHI: While there was evidence of a broader economic recovery in the third quarter (Q3) of FY22, it has yet to achieve the sustainability sought by the central bank as a precursor to normalization policies, according to the rating agency Icra Ltd. said Wednesday.
The annual performance of 10 of the 15 high-frequency indicators improved in December compared to November, such as the generation of GST electronic transport bills, exports of non-oil goods, electricity production, production of two -wheels as well as aggregate and non-food deposits. credit from regular commercial banks.
While the performance of Coal India Limited (CIL), passenger vehicles (PV), vehicle registrations, port cargo traffic and domestic airline passenger traffic deteriorated in December compared to the previous month, this was mainly due to an unfavorable basis. However, the annual performance of nine of the 15 high-frequency indicators in December 2021 is lower than the growth observed in October 2021.
“Economic activity rebounded in December 2021, even as many sectors continued to track the performance recorded in October 2021. Encouragingly, quarterly data suggests a modest broad base for the recovery in Q3 2022, compared to the Q2 2022, compared to respective precedents.-Tomes Covid. However, the onset of the third wave of Covid-19 triggered state-level restrictions, which would have halted momentum in the current month, reiterating that the recovery has yet to achieve sustainability,” said Aditi Nayar, Chief Economist, Icra.
In addition to high-frequency indicators, FASTag toll collections and retail payments reached all-time highs in December, while monthly mobility for retail and leisure exceeded the benchmark period level for the first time since the start of the pandemic.
“… Encouragingly, photovoltaic generation and port freight traffic recorded a turnaround, surpassing their pre-Covid volumes in the third quarter of fiscal 2022, suggesting a modest broad base for the economic recovery. However, margin compression may have limited value-added growth, based on which CIFAR expects real GDP to grow 6-6.5% year-over-year in Q3 of the fiscal year 2022 (+8.4% in Q2 of FY2022),” Nayar said.
“Following the reimposition of state restrictions to curb the third wave of covid-19, early data for January 2022 is expected to be weak; the average daily generation of GST e-transportation bills has fallen to 2.1 million during Jan 1 – Jan 16, 2022, compared to 2.3 million in Dec 2021. After year-on-year growth in Dec 2021, gasoline and diesel sales from public refiners returned to a contraction during the first half of January 2022. In addition, the year-on-year growth in electricity demand was 1.9% from January 1 to 16, 2022 compared to 2.8% in December 2021,” she added.
Following the new uncertainty caused by the spread of the Omicron variant and the associated restrictions, the rating agency expects a status quo on the position of the rate setting panel as well as on the reverse repo rate during next meeting, despite rising retail inflation. in December.
The monthly indicators monitored by the Icra include the production of PV, motorcycles, scooters, vehicle registrations, production of CIL, electricity production, exports of non-oil goods, port freight traffic, rail freight traffic, generation of GST electronic transport invoices, national airlines. passenger traffic, gasoline and diesel consumption, aggregated deposits and non-food credit from regular commercial banks. Quarterly data also includes CV production.
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