The CEIC Leading Indicator for India increased for a third consecutive month in August, rising to 113.1 from 107.3 in July.

Electricity generation continued to be a key driver of this increase, accelerating from 7.1% y/y in July to 17.1% y/y in August, despite the dissipating effects of the low base in 2020. On the other hand, the moderation in production of both crude and finished steel persisted for the fourth month in a row, inching closer to the pre-pandemic rates of growth. In addition to this, passenger vehicle production slowed from 52.6% y/y in July to 5% y/y in August.

The exuberance in the capital markets also contributed substantially to the increase of the CEIC Leading Indicator. The Bombay Stock Exchange Sensex closed at a record high of 57,552.4, registering an increase of 49% y/y in August, the growth rate hastening in comparison to the previous month. The total amount outstanding in 91-day treasury bills declined for the first time since May 2020, by 0.7% y/y in August 2021. The cut-off yield for 3-month treasury bills was also reduced from 3.39% pa to 3.30% pa. In terms of inflation, the wholesale food price index eased further in August, to 3.4% y/y, from 4.5% in July.  

The smoothed CEIC Leading Indicator registered an increase in August to 107.2, by 0.1 points m/m, much in line with the anticipation over the previous month. Even though the increase is marginal, it reflects the steady pace of recovery, which is expected to continue further through the rest of the year, in the absence of any further adverse events. The risk of a third wave looms as cases increase in certain parts of the country, but, at the same time, the containment and precautionary measures are likely to help keep up the pace of economic activity.