Indian Economy Pulling Out Of Covid-19's Deep Abyss Says RBI

More evidence has been turned in to show that the Indian economy is pulling out of COVID-19's deep abyss and is reflating at a pace that beats most predictions, the Reserve Bank Of India (RBI), stated in a latest update. Economic conditions continued to improve through November 2020 on the back of the uptick in agriculture and manufacturing activity. Financial conditions embodied in interest rates are perhaps at their easiest in decades. Although headwinds blow, steadfast efforts by all stakeholders could put India on a faster growth trajectory.

RBI aimed to capture the dynamics of economic activity at state level in India by constructing a Coincident Index (CI) with daily high frequency variables. COVID-19 pandemic has completely altered how policymakers monitor economic data in the context of rapidly evolving economic activity and diverging sub-national trends to undertake appropriate and swift policy responses.

States across all the regions saw a sharp fall in economic activity in April following the announcement of nationwide lockdown. Subsequently, CIs of all regions exhibited recovery, albeit, with intermittent downward movements. As per CIs, Northern region saw the sharpest recovery in June followed by positive momentum in July, while the Western states of Gujarat and Maharashtra saw the slowest recovery, which was prolonged till end-July and first week of August.

Notably, CIs for states across regions registered sharp upturn in October. Even though some moderation was recorded in first half of November, momentum remained positive and revived in the second half in most states. Furthermore, CI has a positive and statistically significant relationship with growth in industrial output.

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