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© Arup Roychoudhury Even limited available data shows May was bad for the economy

The data for Goods and Service Tax (GST) collections for May, which were supposed to be released on June 1, has been delayed due to extensions of certain filing deadlines.

That data, when it comes out, will provide the biggest indication of the impact of the deadly ‘second wave’ of COVID-19 on India’s economy.

However, while that and other indicators like industrial output are still to come, the limited data available so far shows that May was probably the worst month of the April-June 2021 quarter.

Speed bump in May

The second wave of COVID cases for India peaked on May 6, with 4.14 lakh cases. It has since then come down as sharply as it rose. As on the evening of June 2, India recorded 1.33 lakh new Covid cases and 3,207 deaths in the last 24 hours.

On June 1, data showed that India’s manufacturing activity hit a major speed bump in May after being on the slow road to improvement in April, as the renewed escalation of the pandemic and subsequent restrictions played spoilsport for factory activity.

According to the monthly IHS Markit India Manufacturing Purchasing Managers’ Index (PMI) survey released, manufacturing PMI stood at a ten-month low of 50.8 in May, down from 55.5 in the previous month of April.

In PMI parlance, a print above 50 means expansion, while a score below that denotes contraction.

Brink of contraction

The May numbers reveal that the sector is standing on the brink of contraction yet again. The slight growth in May was mostly contributed by foreign export orders rather than domestic demand.

New demand, new work orders and export contracts all marginally increased in May. But it was not enough to push up production or sales by a sustainable margin as the new orders rose at the slowest pace since August 2020, hurt by local lockdowns

According to the PMI survey, demand was suppressed by the COVID-19 crisis.

The sudden rise in the second wave of the pandemic and difficulties in securing raw materials, did not help.

Auto sales hit

While the industry-wide data will come later this month, initial sales figures released by some of the automakers do not point to an encouraging trend.

The auto industry is estimated to have sold little over 103,000 units in May which is only one-third compared to the average of 300,000 units sold every month between January to April.

All the automakers posted a huge jump in sales compared to May 2020, when the country was under a nationwide lockdown. However, the extent of their fall in sales on a month-on-month basis will be clear in the next few days.

Additionally, there are some data points available from the high-frequency indicators which the Finance Ministry tracks on a weekly basis to gauge the extent of economic recovery.

CEA’s presentation

These were revealed by the Chief Economic Advisor Krishnamurthy Subramanian when he gave a presentation during a media briefing on May 31.

This was after the gross domestic product (GDP) data for 2020-21 was released.

Subramanian admitted that the regional lockdowns and a devastating second wave had hit the economy in May 2021, compared to April and March.

As per his presentation, the average electronic toll collections for May came in at Rs 68.6 crore, compared with Rs 92.3 crore and Rs 99.3 crore in April and March respectively.

That data showed a 31 per cent drop in toll collections between March and May. In terms of transaction volume, that fall stood at 40 per cent.

Big fall

A big fall was also visible in the external sector. As per Subramanian’s presentation, net foreign portfolio investment (FPI) inflows were estimated at $400 million in May, an outflow of $1.7 billion in April, and net inflow of $3.6 billion in March.

That means from March to May, net FPIs fell 89 per cent.

There is a lot more data left to be released, including power consumption, steel production, railways freight and passenger data, aviation passenger load factor data, core sector and others.

As these numbers are made public, the full extent of the pandemic’s impact on May will become clearer.