No early recovery for Covid-19-hit economy

India could be staring at a deeper slowdown this year, with the latest macro-economic data on manufacturing, loan growth and demand for work under the rural employment guarantee scheme not painting an encouraging picture.

Various estimates have suggested that India’s growth in 2020-21 could contract up to 9.5%.

The deepening gloom was reflected in a global survey of 27,000 people in 26 economies, which showed that over 54% of Indians expected to be in deep recession in the next 12 months.

Data released by IHS Markit showed that purchasing managers' index (PMI) for manufacturing had declined to 46 in July from 47.2 in June. A figure below 50 indicates contraction. The same survey for China showed the communist country's manufacturing activity had expanded at its fastest pace since 2011.

Another data point by the Reserve Bank of India on banking loans taken by the industry and others showed that the growth in credit for the fortnight ending July 17 was the lowest in the past three years. It rose only 5.8% year-on-year to Rs 102.2 lakh crore due to fear among bankers on giving away loans and lower demand by companies and the retail sector due to the pandemic.

Last year, in the same fortnight, the banking sector saw an overall credit growth of 12.2%. Bank lending to industry and retail is a good indicator of corporate and consumer confidence in the economy.

On the rural jobs front, government data showed that the demand for work under the Mahatma Gandhi National Rural Employment Guarantee Act had fallen by over 31% in July.

Only 4.2 crore people demanded work under the MGNREGA in July compared with 6.2 crore in June. Employment provided under the scheme too fell over 59% to 26 crore person-days from over 63 crore person-days in June.

YouGov survey

A global survey by market research and data company YouGov, the results of which were published by the World Economic Forum, showed that over 54% of Indians surveyed expected to be in deep recession in the next 12 months.

This is in stark contrast to Vietnam and China, whose citizens remained most upbeat, with half of their population believing their economies would remain stable and less than 30% expecting a recession.

In India, only 21% believed the economy will remain stable. Among the 26 economies, Indians households suffered one of the greatest financial impacts, with 50% reporting their finances had declined in the past month.

The Google community mobility report, too, showed people’s movement across food shops, pharmacies, supermarkets, transport hubs and places of work remained stagnant in July too.