Watching the recovery - September 2021

INDIA - Report 07 Sep 2021 by Ila Patnaik

High frequency data shows that the recovery from the bottom of Wave 2 is progressing better than the recovery from the lockdown of March/April 2020. If present trends continue, we will be back to the pre-Wave-2 conditions (i.e., Jan/Feb 2021) within a month or two. There is a striking gap between the recovery of quantities in the labor market (the employment rate is not too far from pre-pandemic conditions) versus prices (wages are low, which is affecting the sentiment-based measures).

While exports are the most important engine of growth in the economy, the Great Supply Chain Disruption is holding them back. India is particularly adversely affected by these difficulties. There are possibilities of new sourcing networks from the Indian heartland, and from South Asia more broadly, bringing goods over land into the internationally oriented production on the peninsula.

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