November 28, 2021
  • November 28, 2021

These states are leading India’s economic response

By on August 5, 2021 0

India’s economic momentum appears to be accelerating, as shown by a series of high-frequency indicators such as PMI, exports and GST collection. Most states have also seen an improvement in the economic indicators taken into account in tracking the recovery of Mint State. With the exception of Kerala and the northeastern states, all states have experienced increased levels of public mobility amid declining cases of covid-19.

The inter-state recovery has been faster than last year. Due to decentralized blockages, supply disruptions have been less severe this year. This is reflected in the performance of key industrial states such as Maharashtra and Gujarat which weathered the shocks of the second wave much better than the collapse of last year.

Although Maharashtra still has a high number of cases and mobility levels remain below the average for all of India, it reported the highest figures on electricity consumption and vehicle sales in July. Uttar Pradesh, which is reporting a negligible number of cases and has achieved pre-pandemic mobility levels, also posted relatively better performance in energy consumption and vehicle registration.

West Bengal lags behind most of the major states in terms of vehicle sales and energy consumption. Kerala also recorded poor figures on these two economic indicators. The Mint State Recovery Tracking examines three high-frequency economic indicators – electricity consumption, vehicle sales, and mobility levels – to track the performance of the largest state economies (those that represent at least 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.

The momentum continues

On the Covid front, July saw some improvement but not enough to rule out the risks of a new wave. Compared with June, the number of new cases of covid-19 decreased slightly in July. Kerala continues to be an outlier among the top states in terms of infection rates. The pace of vaccination in India has so far been like a swing. After the promising increase in vaccination during the second half of June, the numbers fell again during the first half of July, only to see a further increase in the last ten days.

A record 8.78 million doses was administered on the last day of the month, helping the government meet its target of 135 million doses in July. However, there are still significant regional disparities, with populated states such as Uttar Pradesh, Bihar and West Bengal lagging behind their less populous peers.

Compared to pre-pandemic levels, electricity consumption increased for the first time in the past three months. In July 2021, 121.6 billion units were consumed, an annualized growth of 2.1% compared to July 2019. Uttar Pradesh, with an annualized growth of 8.1%, recorded the highest improvement among major states. The worst off was Karnataka, which experienced a 4.1% drop. On average, medium and small states performed better than large states.

1.56 million vehicles were sold in July, registering an impressive sequential increase of 28%, according to data from Vahan. However, this is still 7% lower than the July 2019 figures on an annualized basis. Maharashtra was the only state to experience growth in vehicle sales from pre-pandemic levels. West Bengal, with a decrease of 12%, recorded the weakest sales performance. Small and medium states have fared less well than large states on this point.

Advances in mobility

Mobility levels across India crossed the 90% mark in July, showing an improvement of 8 percentage points from June levels. Traffic in public spaces has returned to pre-pandemic levels in Uttar Pradesh, Tamil Nadu, Rajasthan and Andhra Pradesh, according to Google mobility data.

Delhi has reported less than 100 cases per day for most of July, but the public here still seem cautious when it comes to getting out. At 76% of normal levels, its mobility is the lowest among any major state. Maharashtra, with 80%, is the second lowest on the table. At 85%, Karnataka and West Bengal also experience relatively low public movement. Overall, medium and small states experienced a higher level of public mobility than their larger counterparts.

Several districts in northeastern states still experience less than 50% mobility amid high infection levels. Some districts in Kerala also report around 60% attendance in public spaces.

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.

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Source: Ministry of Roads

This bodes well for India’s economic recovery this year, as these states are the country’s main hubs of economic activity. However, the risks of Covid have not yet diminished and the economy has not fully recovered. How states contain the risk of a third wave while ramping up vaccination will be key to sustaining the current momentum.

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