A revival of demand seen in September apparently gathered more steam in October, with a surge in certain early high-frequency indicators, like manufacturing PMI, power generation, auto sales and rail freight, and even fuel sales.
This lends some credence to the notion that the economy may be healing faster from the Covid-induced shock than anticipated earlier. But analysts warn that the durability of this rebound, seemingly aided by spillover of pent-up demand post-lockdown, can be established only if the momentum outlasts the festive season.
Manufacturing activity, as measured by the Purchasing Managers Index (PMI), scaled its peak in over decade in October, having seen a third straight monthly improvement. Manufacturing output touched a 13-year high, while sales, too, improved dramatically.
Electricity generation, a close proxy for economic activities, rose for a second straight month in October, registering a 12.1 per cent year-on-year (y-o-y) rise, against 4.6 per cent in the previous month. Diesel consumption in October rose 6.6 per cent, the first y-o-y increase since Covid-19 restrictions were brought late March.
Auto sales, too, zoomed in October, driven by festive demand. Mirroring the improvement in leading gauges, the Nomura India Business Resumption Index improved to 82.4 in October, a rise of 2.6 points from 80.3 in September and 73.6 in August. “However, it remains to be seen whether this momentum outlives the festival-led activity surge. We also remain cautious on the potential reversal of pandemic gains in November-December, as the festive season draws down,” Sonal Varma and Aurodeep Nandi of Nomura said in a report on Monday. —FE
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