What high-frequency indicators tell us about the state of the economy

Is the Indian economy finally turning a corner? It might just be, if high-frequency indicators (HFIs) are anything to go by. 

According to media reports, 19 of the 22 HFIs being monitored to track the progress of the Indian economy since the first Covid-19 case was reported in the country in January 2020 show that the economy may be on an upswing as compared to pre-Covid levels. 

What do the indicators actually say?

According to news reports, full recovery has been achieved in respect of 19 HFIs, as their latest levels in the months of September, October and November this year are higher than their pre-pandemic levels in the corresponding months of 2019. 

Citing unnamed government sources, the Press Trust of India reported that the trend is further confirmed by the estimates of GDP recently released for Q2 (July-September) of 2021-22, whose year-on-year growth in real terms at 8.4% takes the output level higher than the pre-pandemic level of Q2 output in 2019-20.

But what really are HFIs?

HFIs are basically time-series data sets collected at extremely finite scale that paint a detailed picture of the state of the economy at different points in time. 

So, what do the HFIs show?

According to the PTI report, among the HFIs there are some whose recovery is way beyond 100%. These include e-way bill by volume, merchandise exports, coal production and rail freight traffic. This suggests that not only the recovery is complete but also that economic growth is gathering momentum over the pre-pandemic levels of output.

For instance, Electronic Toll Collection at Rs 108.2 crore in October was 157% of the pre-Covid levels of 2019. Similarly, UPI payment volumes are nearly four times at 421.9 crore.

Merchandise imports at $55.4 billion in October are 146% of 2019 levels. E-way bill volume has more than doubled to 7.4 crore in October. Coal production has risen 131% to 114.1 million tonnes in September while rail freight traffic has jumped 125%.

Fertiliser sales, power consumption, tractor sales, cement production, port cargo traffic, fuel consumption, air cargo, IIP, and production of eight core industries are all above pre-Covid levels. 

Which sectors are still lagging behind?

The only sectors that are yet to touch the pre-pandemic level are steel consumption, which is 99% of 2019 levels in October; domestic auto sales, which are 86% of pre-Covid levels; and air passenger traffic, which is 66% of the October 2019 volume, the report noted.