Business resumption remains high at the cusp of third covid wave: Nomura

Even as the scare of Omicron variant of covid is threatening to disrupt the economy, business resumption has remained high last week in India. 

The Nomura India Business Resumption Index, which tracks high-frequency data, inched up to 120.3 for the week ending 2 January from an upwardly revised 120.2 during the prior week (119.8 previously).

This was largely due to a 10.4 percentage points weekly rise in the Apple driving index, while the Google workplace mobility index fell by 6 pp and the retail and recreation mobility index rose by 0.6 pp. The labour participation rate inched down marginally to 40.6% from 40.7% in the prior week, and power demand fell by 3.1% week-on-week after a 2.5% rise the prior week.

Nomura said India seems to be on the cusp of a third wave. New daily cases rose to 33,750 yesterday from 6,500 a week ago. Maharashtra, Delhi and West Bengal are at the forefront, but case numbers in other states are also rising sharply, with 1,700 confirmed Omicron cases so far. The vaccination pace rose to 6.5 million per day in December from 5.4 million per day in November, with 44% of the population fully vaccinated.

“States have announced more restrictions, but elevated mobility and a rising positivity rate suggest a further rise in new cases. While early signs point to a lower mortality rate, it bears close monitoring. The restrictions could derail the recovery in contact-intensive services in Q1, but global experience suggests a smaller impact than previous waves and a swift growth rebound once cases peak,” Nomura said.

In an earlier note, Nomura had said that the current restrictions appear primarily targeted towards new year festivities, but if these get extended into January, they may affect mobility and delay the recovery in contact-intensive services. “However, a more pandemic resilient economy should cushion industry, broader services, and agriculture, supporting overall growth,” it added.