SBI feels the heat! Business activity index hits new low in April due to COVID-19 pandemic

The SBI business activity index has declined to hit a new low in April amid the second wave of Covid-19 and the fresh lockdown measures.

An SBI Ecowrap report said that the index is 24.3 percent down from the pre-pandemic level.

"SBI business activity Index which has been declining in April`21 has now dipped to a new low of 75.7, the level it had attained in August 2020 and now a clear 24.3 percent down a from-pre pandemic level," it said.

This indicates the disruption caused by increased lockdowns and restrictions imposed in various states, is now having a meaningful impact on economic activity.
All the indicators, except for labour participation and electricity consumption have declined significantly during April, indicating that labour market disruptions are still manageable unlike the first wave, it said.

Noting that India managed the first wave of pandemic well and the country is now facing an unprecedented second wave, it said: "There is no doubt that India could have done better. However, it must be emphasised that the ferocity of the second wave had even exposed the developed countries` health infrastructure."

In order to fight with the second wave of Covid-19, most of the European and other nations imposed nationwide lockdown in the range of one week to six months, it said.

The report, however, noted that India`s recovery rate, which was at 97 percent at the beginning of the second wave, is now at 82.5 percent. This 14.5 percent reduction in recovery rate has happened over a period of 69 days.

"Based on other countries` experience we believe India might reach its second peak when the recovery rate will be at 77.8 percent. Given that every 1 percent reduction in recovery rate takes around 4.5 days, it translates into around 20 days from now," it said.

It further said that every 1 percent reduction in recovery rate increases active cases by 1.85 lakh. "Thus we believe the peak of second-wave would come around mid-May with active cases reaching around 36 lakh at that point of time," said the report.