Sluggish economic momentum to limit discretionary buying: ICRA

May 22, 2021 16:33 First

New Delhi [India]May 22 (ANI): The economic momentum induced by the second wave of COVID-19 infections in India has emerged as a concern with weak sentiment, high healthcare costs and fuel spending likely to limit discretionary purchases in the immediate term , rating agency ICRA has said.
In addition, contact-intensive services can expect spending cuts, said chief economist Aditi Nair.
As expected, the shrinking base of the nationwide lockdown in April 2020 fueled the pace of year-on-year expansion of several high-frequency indicators in April this year, resulting in a broader improvement than the performance in March.
“However, the optimism generated by this trend is limited as 8 out of 13 non-financial indicators remained below their pre-Covid levels in the past month,” she said.
In addition, indicators such as GST e-way bill, electricity generation, vehicle registration and rail freight traffic showed a slower gradual pace, reflecting the rise in COVID-19 cases and the imposition of local restrictions.
“The early May figures confirm that this trend is continuing as the lockdown has been extended and spread to other states to prevent a second wave of COVID-19,” Nair said.
The sharply higher daily infections in the second wave of COVID-19 will have a long-term negative impact on consumer sentiment, he added.
Substantial health care spending coupled with high retail fuel prices are likely to reduce disposable income in urban and rural areas.
Also, following the slowdown in demand witnessed during the festive season in 2020, demand for several varieties of consumer durables may subside.
“Overall, we expect discretionary spending on consumer durables and areas such as home improvement to be limited in the near term, apart from expected cuts in spending on contact-intensive services,” Nair said.
Monthly indicators tracked by ICRA include production of passenger vehicles, motorcycles, scooters, vehicle registration, production of Coal India Limited, power generation, non-oil merchandise exports, port cargo traffic, rail freight traffic, generation of GST e-way bill is included. , passenger traffic of domestic airlines, consumption of petrol and diesel, aggregate deposits of scheduled commercial banks and non-food credit. (ANI)

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