Uptick in headline numbers of key economic indicators in April is due to the base effect and that the economy is headed into rough patch as consumer sentiment is down in the dumps due to the second wave of the pandemic, according to rating agency ICRA.
Despite the base effect-led spike in growth of many sectoral indicators in April, the slackening momentum, driven by the second wave of the pandemic has emerged as a major concern. Moreover, the bruised consumer sentiment and the high healthcare and fuel bills will limit discretionary purchases in the immediate term, in addition to the expected cut-back in spending on contact-intensive services, leading to a negative overall impact on the economy, the agency said on Wednesday.
"As expected, the shrunken base of the nationwide lockdown in April 2020 has boosted the pace of year-on-year expansion of several high-frequency indicators in April 2021, resulting in a widespread improvement compared to the performance in March 2021. "However, the optimism generated by this trend is limited, as eight of the 13 non-financial indicators in April remained below their preCOVID-19, i.e. at April 2019 levels," ICRA Chief Economist Aditi Nayar said.
She added that indicators such as GST e-way bills, electricity generation, vehicle registrations and rail freight traffic have slowed down and lost the sequential momentum in April, reflecting the rise in the pandemic infections cases and localised lockdowns.
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