No. PR- 052
June 9, 2021
PHDCCI Economy GPS Index May 2021
May 2021 economic activity at 9 months low, 2nd wave of COVID-19 impacted trade and industry: PHD Chamber
The second wave of COVID-19 pandemic in April and May 2021 across the nation, with much more severe impact than the first wave of 2020, has drastically impacted the economic recovery. The PHDCCI Economy GPS index has therefore fallen to a nine months low at 93.3 for May 2021 from 124.3 recorded for April 2021 (Base year 2018-19 = 100), said Sanjay Aggarwal, President, PHD Chamber of Commerce and Industry, in a press statement issued here today.
PHDCCI Economy GPS INDEX was consistently rising from 114.8 for December 2020 to 121.7 for January 2021, 122.0 for February 2021, 122.9 for March 2021 and 124.3 for April 2021.
The Economy GPS Index for May 2021 at the level of 93.3 is at a nine months low as the previous low was 90.5 for August 2020.
However, the Economy GPS Index at 93.3 for May 2021 is higher by 43.2 points from the Economy GPS Index for May 2020 at 50.1, said Sanjay Aggarwal.
Sequential growth of passenger vehicles declined by (-)60.5% from 2,61,633 units in April 2021 to 1,03,343 units in May 2021. Sequential growth of GST collections also decreased by (-)27.4% from Rs. 1,41,384 crore in April 2021 to Rs. 1,02,709 crore in May 2021. However, the average of daily close of SENSEX rose by 1.9% from 48878 in April 2021 to 49823 in May 2021.
Uncertain economic environment, depressed demand and investment scenario, skyrocketing commodity prices caused by supply chain disruptions, diversion of household savings to medical needs, squeezed working capital of the business enterprises, among others, have created a difficult time for the trade and industry which were already impacted by the 1st covid wave in 2020, said Sanjay Aggarwal.
On a monthly basis, PHDCCI Economy GPS Index had shown sharp recovery from the lows of 39.6 for April 2020 to 50.1 for May 2020, 75.1 for June 2020, 85.6 for July 2020, 90.5 for August 2020, 100.2 for September 2020, 109.6 for October 2020, 106.9 for November 2020, 114.9 for December 2020, 121.7 for January 2021, 122.0 for February 2021, 122.9 for March 2021, 124.3 for April 2021 and 93.3 for May 2021. There is a strong correlation between the GDP and GPS at the rate of 0.7, as depicted in the Chart 2 below.
Chart 1: GPS Index: Monthly Trend Chart 2: Movement of GDP and GPS over the quarters
Source: PHD Research Bureau, PHDCCI Economy GPS Index
At this juncture, there is a need to fuel the drivers of household consumption and private investments to enhance the aggregate demand in the economy with calibrated and effective steps. Demand creation will have an accelerator effect on expansion of capital investments in the country, said Sanjay Aggarwal.
National Infrastructure Pipeline expenditure needs to be front-loaded as private investments are not forthcoming in the short term, said Aggarwal
A substantial stimulus to mitigate the impact of the second wave of the Covid-19 pandemic on the trade and industry would be crucial to support the economic momentum in this extremely difficult time, he said
More and more direct benefits transfer needs to be considered for the urban and rural poor under the various welfare schemes in addition to the free distribution of dry rations till Diwali already announced by the PM, said Sanjay Aggarwal
Government/ PSU payments particularly to MSMEs must not be delayed due to any shortage of staff caused by Work From Home system or due to shortage of funds since the MSMEs are already suffering from losses and liquidity issues resulting from lockdowns, said Aggarwal
At least 75% of the population of the country needs to be vaccinated with both doses at the earliest, not later than December 2021 to remove the uncertainty in the economy, he said
A substantial stimulus to mitigate the impact of the second wave of the Covid-19 pandemic on the trade and industry would be crucial to support the economic momentum in this extremely difficult time, said Sanjay Aggarwal
PHD Chamber of Commerce and Industry (PHDCCI) Economy GPS Index is a composite index of 3 lead economic and business indicators with base year at 2018-19=100, which measures the broad economic and business activity. The PHDCCI Economy GPS Index, based on the monthly values of three high frequency indicators viz., GST collection (Rs. Crore), Passenger Vehicle Sales (units) and SENSEX (daily average), helps to find the direction of the economy. The three broad indicators are representing not only demand and supply in the economy but also revenue growth of the government and movement of financial markets in the country. GST collections indicate the momentum of business activity, passenger vehicle sales is broad indicator of demand activity in the economy and movement of SENSEX indicate mood of both domestic and foreign investors.
Movement of Economy GPS over the months
|Month- Year||Economy GPS Index|
Source: PHD Research Bureau, PHD Chamber
PHD Chamber of Commerce and Industry