The Indian economy continues to be resilient, suggests the ICRA Business Activity Monitor, an index constructed using 14 monthly high-frequency indicators. The monthly index improved to 13% in November 2022 from 7.4% in October 2022, partly on account of a favourable base related to the shift in the holiday calendar owing to the later onset of the festive season in 2021 vis-à-vis 2022, ICRA notes.

The composite tool that gauges economic activity each month posted an average YoY expansion of 10.2% in October-November 2022, only mildly lower than the 12% seen in Q2 FY2023, indicating the momentum of domestic economic activity was resilient, despite the base normalisation and flagging external demand, the ICRA Business Activity Monitor points out.

The index in October-November 2022 also exceeded the 2019 levels by 16.9% (higher than the 16.4% uptick in Q2 FY2023), boosted by a healthy recovery in the demand for goods during the festive period amid the sustained pick-up in the consumption of contact-intensive services.

However, the ICRA Business Activity Monitor suggests early trends for December 2022 are discouraging, and the YoY growth of most indicators is likely to moderate in the month, given the base effect. “While we expect the YoY GDP growth to ease to 5.0-5.5% in Q3 FY2023 from 6.3% in Q2 FY2023, the growth over pre-Covid levels of FY2020 is expected to improve further, from the 7.6% seen in Q2 FY2023,” ICRA says.

The ICRA Business Activity Monitor is constructed using 14 monthly high-frequency indicators – auto production (comprising passenger vehicle, motorcycle and scooter production clubbed into a single indicator), the output of Coal India Limited, electricity generation, non-oil merchandise exports, rail freight traffic, ports cargo traffic, non-food bank credit of scheduled commercial banks, bank deposits, vehicle registrations, generation of GST e-way bills, domestic airlines’ passenger traffic, petrol consumption, diesel consumption and steel consumption.

Each of these indicators is indexed in a way that the average index value for the base year FY2019 amounts to 100. The index is computed by taking the mean of the index values of these 14 indicators and is released with a lag of two weeks.

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