India's growth indicators show that animal spirits are very much alive



From Anirban Nag

The Indian economy removes the world trade wars and relies on domestic consumption to become the fastest growing large economy this year. Demand for bank loans remained solid in the quarter of July, despite rising interest rates, and so was it with services and industrial products, a cross-section of forward-looking indicators compiled by Bloomberg News show ahead of government data on economic growth due to August 31. Foreign investment slowed, with an emphasis on risks for the balance of payments position of India.

Other risks arise in the form of higher oil prices, tightening of global financial conditions and a shortage of taxes that can bring the budgetary targets out of reach. For now the economy is showing steady expansion, with the International Monetary Fund predicting growth of 7.3 percent in the fiscal year to March 2019 and 7.5 percent in the next, while reforms initiated by Prime Minister Narendra Modi are bearing fruit. .

Here are the full details of the dashboard:

Business activity
India's main service index rose fastest in July in 21 months, according to the latest survey from purchasing managers, while production continued to grow, but at a slower pace. These have together pushed the composite index to the highest level since October 2016. The optimism comes from an increase in new orders, which give companies confidence to produce more.

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On the front of the price there were mixed signs. Service providers could not fully pass on the rising costs, while manufacturers increased the output costs for the twelfth month in a row.

Central bank data also showed a rebound in occupancy rates above 75 percent. This profit usually drives inflationary pressure and indicates improved pricing power, which ultimately provides more incentives to invest.

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Export
Exports grew by a relatively strong 14.3 percent in July from a year earlier, although slower than the pace of 18 percent in the previous month. Economists and policy makers are optimistic that the recent weakness in the rupee will help support recovery in sectors such as textiles.

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Consumer activity
Data from the Society of Indian Automobile Manufacturers show that the industry produced more vehicles in July than a year ago, with the increase among commercial vehicles and two-wheelers. Total sales increased by 8 percent in the last indicator, which is the view that domestic demand is holding up well.

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With more consumption there is more demand for loans. Bank lending rose by 12.7 percent in August from a year ago, with most loans being provided to the services sector. Issues of commercial papers also increase.

But those numbers do not tell the whole story. Bloomberg Economics & Abhishek Gupta attributed the increase in bank credit over the past year, largely as a result of favorable base effects. Increasing funding costs have, instead, reduced corporate bond issuance, indicating that total lending to business is weak, he said.

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The Citi India Financial Conditions Index shows a tightening of the markets amid back-to-back interest rate increases by the Reserve Bank of India. The index includes indicators for short-term money market interest rates, yields on government bonds (short and long term), interest rate curves, credit and credit default spreads.

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Economic activity
Foreign direct investment dropped to the lowest level since January and that could depress India's balance of payments. The current account deficit is expected to grow as a result of higher oil prices and a slowing inflow into the capital markets. With a general election in early 2019, worries about policy paralysis and whether Modi will succeed in repeating its landslide win of 2014 will keep many investors on the sidelines.

Industrial activity
The risk & # 39; s notwithstanding, the output of infrastructure industries – which contribute 40 percent to the industrial production index – give hope. The growth rate of 6.7 percent in June compared to a year earlier was the strongest in seven months.


Source link

India's growth indicators show that animal spirits are very much alive



From Anirban Nag

The Indian economy removes the world trade wars and relies on domestic consumption to become the fastest growing large economy this year. Demand for bank loans remained solid in the quarter of July, despite rising interest rates, and so was it with services and industrial products, a cross-section of forward-looking indicators compiled by Bloomberg News show ahead of government data on economic growth due to August 31. Foreign investment slowed, with an emphasis on risks for the balance of payments position of India.

Other risks arise in the form of higher oil prices, tightening of global financial conditions and a shortage of taxes that can bring the budgetary targets out of reach. For now the economy is showing steady expansion, with the International Monetary Fund predicting growth of 7.3 percent in the fiscal year to March 2019 and 7.5 percent in the next, while reforms initiated by Prime Minister Narendra Modi are bearing fruit. .

Here are the full details of the dashboard:

Business activity
India's main service index rose fastest in July in 21 months, according to the latest survey from purchasing managers, while production continued to grow, but at a slower pace. These have together pushed the composite index to the highest level since October 2016. The optimism comes from an increase in new orders, which give companies confidence to produce more.

Untitled-8

On the front of the price there were mixed signs. Service providers could not fully pass on the rising costs, while manufacturers increased the output costs for the twelfth month in a row.

Central bank data also showed a rebound in occupancy rates above 75 percent. This profit usually drives inflationary pressure and indicates improved pricing power, which ultimately provides more incentives to invest.

Untitled-9

Export
Exports grew by a relatively strong 14.3 percent in July from a year earlier, although slower than the pace of 18 percent in the previous month. Economists and policy makers are optimistic that the recent weakness in the rupee will help support recovery in sectors such as textiles.

Untitled-10

Consumer activity
Data from the Society of Indian Automobile Manufacturers show that the industry produced more vehicles in July than a year ago, with the increase among commercial vehicles and two-wheelers. Total sales increased by 8 percent in the last indicator, which is the view that domestic demand is holding up well.

Untitled-11

With more consumption there is more demand for loans. Bank lending rose by 12.7 percent in August from a year ago, with most loans being provided to the services sector. Issues of commercial papers also increase.

But those numbers do not tell the whole story. Bloomberg Economics & Abhishek Gupta attributed the increase in bank credit over the past year, largely as a result of favorable base effects. Increasing funding costs have, instead, reduced corporate bond issuance, indicating that total lending to business is weak, he said.

Untitled-12

The Citi India Financial Conditions Index shows a tightening of the markets amid back-to-back interest rate increases by the Reserve Bank of India. The index includes indicators for short-term money market interest rates, yields on government bonds (short and long term), interest rate curves, credit and credit default spreads.

Untitled-13

Economic activity
Foreign direct investment dropped to the lowest level since January and that could depress India's balance of payments. The current account deficit is expected to grow as a result of higher oil prices and a slowing inflow into the capital markets. With a general election in early 2019, worries about policy paralysis and whether Modi will succeed in repeating its landslide win of 2014 will keep many investors on the sidelines.

Industrial activity
The risk & # 39; s notwithstanding, the output of infrastructure industries – which contribute 40 percent to the industrial production index – give hope. The growth rate of 6.7 percent in June compared to a year earlier was the strongest in seven months.


Source link

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