4 Worrisome Economic Indicators for the Indian Economy
It is no news that the Indian economy is in a sluggish phase since the past few months. Although the government has been pulling out all stops to revive the economy, numbers are indicating otherwise.
Despite bagging the 63rd position out of 190 nations in the World Bank’s ease of doing business index, India’s business confidence index declined to 15.3 per cent in the October 2019 quarter.
Recently, rating’s agency Moody’s cut India’s sovereign rating outlook to negative from stable and hinted that if the GDP growth does not revive, the government will face constraints in narrowing the budget deficit and control the rise in debt burden.
Index of Industrial Production
As per data released on Monday, India’s industrial production contracted 4.3% in September, the lowest in eight years since the new series started in April 2012. This the second consecutive month in which manufacturing shrank. There was a fall in all components of IIP including mining, manufacturing and electricity.
Decline in GDP
GDP, or the Gross Domestic Product, is a key indicator of economic growth as it quantifies the total goods and services produced in a country in a specified time period. The GDP growth of India has gone down to 5% in the April-June quarter of this year, which is the lowest growth rate in the past 6 years. Last year during the same period, GDP rate was recorded at 8%.
Fall in consumption and weak manufacturing numbers are the two key factors responsible for the slowing GDP growth rate. India’s rural or suburban population has also seen a fall in income due to decline in construction wages and job cuts across auto and manufacturing sectors.
Fall in Diesel Demand
Diesel consumption is directly connected to consumption pattern in the economy. Since diesel is used for transportation of goods including food items and consumer goods, a fall in diesel consumption points to less movement of goods, in turn pointing at weak consumption. There has been a sharp fall of 3.3% in diesel consumption in September 2019 compared with the period a year ago.
However, it should be kept in mind that a part of reduction can also be due to the Indian Railways going ahead with its route electrification plans. The railways is one of the biggest consumers of diesel in the country as it has a huge fleet of locomotives running on diesel.
Auto Sector Woes
Despite a little respite in October, thanks to the festive season, auto sales have been declining for the past one year. There has been some respite in October as retail passenger vehicle sales grew a miniscule 0.3%, mainly on the back of a sharp 22.2% jump in retail sales of utility vehicles, as per data from the Society of Indian Automobile Manufacturers.
However, experts are unsure if this turnaround can be sustained in the months ahead.