Has India’s economic growth become uncertain?


The Indian economy seems stuck in a crisis mode and the high-Frequency indicators for the second month in a row have not really improved too.

As 14 of 16 macroeconomic indicators taken into consideration at the tracker were red or below its 5-year growth rate, the economy took a huge success in April. It was the worst reading since the tracker started in October 2018 to include a monthly economic report card.

The reading of the tracker illustrates data obtained from Google on public movements. Despite changes in May and early June, public activity stagnated with cases of coronavirus initiation and state lockdowns at the end of June and July. Movement in workplaces and visits to parks in August has risen considerably, but the level of movement is still far below its pre-pandemic level.

With three of the four consumption indicators, the consumption scorecard was only slightly better than the production scorecard. The sales of passenger cars rose to the highest level since March to July but were considerably below year-on-year (-17%). There was no significant improvement in domestic passenger growth (-82%). The growth of broadband subscribers continues in a favorable environment, but growth remains well below the 5-year average. In July, tractor sales saw a strong rise (39%) in the otherwise slow consumer economy.

In recent months, the financial indicators in India have strengthened, amid a continued downturn in the real economy. The spillage of foreign influxes contributed to India’s dollar appreciation, even with foreign exchange reserves continuously improving. In July, the gain in Indian imports, currency and stock-market capitalization improved led to India becoming one of the key emerging economies.

The rush of liquidity has, however, also raised questions about the enthusiasm that investors display. In a recent interview, RBI Governor Shaktikanta Das warned that the stock markets are separated from reality and can be directed towards a correction.

According to the new RBI Industrial Outlook Survey of 802 companies, the job outlook remains grim.  In the quarter of June, 29 % of the respondents reported that jobs were declining. This is the worst recruitment response since 2005. Eight percent of the respondents announced that the quarter ended in September will also see jobs decline. 

Low demand and inflation grew nearly 7 percent, increasing the stagflation spectrum increased as a result of slow growth. There was a consensus that the inflation increase will soon be over because of domestic demand weaknesses. The dark warnings by the monetary policy committee members of the Reserve Bank of India (RBI), which chose to pause rate cuts earlier this month, however, have raised concern that inflationary strife might take longer than previously thought.

The Indian economy is not yet out of the crisis. It is critical, on health and the economic front, how long it takes to get out of the crisis.


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