These 6 indicators will tell you the extent of India’s slowdown
Indian economy’s growth is expected to hit below 5 per cent level in the September quarter. The GDP data is scheduled to be released on November 29. In the recent past, auto sales, consumption, real estate sales and bank credit data -- all indicators of an economy’s health -- have painted a bleak picture. Keep an eye on following six indications to see signs of revival in Indian economy:
Bank credit growth, including bank retail credit and lending to industry, is a good indicator of confidence among corporates and also the consumer sentiment. Muted lending spells a slowdown. Interestingly, there has only been a marginal fall in growth of retail loans. During April to June, the retail loans of banks grew by 16.6 per cent in comparison to 17.9 per cent in the same period last year. During the same period last year, they had grown by 17.9 per cent.
Bank lending to industry, which is a crucial indicator went up by 6.5 per cent against 0.9 per cent. However, this was largely on account of lending to large industries. Lending to micro and small industries almost flat at 0.6 per cent against 0.7 per cent last year.
Economic slowdown affects every segment of the automotive industry, be it cars, two-wheelers or tractors. Car sales fell 23.3 per cent during April to June 2019. This was the biggest contraction in quarterly sales since 2004. One reason behind this huge drop was fall in purchasing power of people. It is for the same reason that two-wheeler sales have not done as badly as cars. Two-wheeler sales contracted by 11.7 per cent during the period.
Tractor sales, which are a good barometer indicators of rural demand, fell by 14.1 per cent, the highest fall in nearly four years.
The housing sector has a direct correlation to employment creation and job security. Cash-conservation is the order of the day in a country where citizens are unsure of getting jobs, or job continuity, and the housing sector has witnessed the wrath.
As per Liases Foras, a real estate research company, India’s top 30 cities saw a jump of 7 per cent unsold housing units from March 2018. This shows that builders are building new houses faster than people are buying them.
The real estate sector has various forward and backward linkages with many ancillary industries. Hence, when the real estate sector does not do well, many other sectors, right from steel and cement to furnishings, paints, etc., do not do well too. The slowdown in the real estate sector, therefore, is indicative of an economic slowdown.
A slump in FMCG sector is a definitive sign of an economic slowdown, which persuades consumers to turn thrifty. Growth in the fast-moving consumer goods has slumped both by value and volume in the past four quarters in a row since July-September 2018, as consumers have shifted to cheaper daily essentials in urban markets and rural growth has slowed too. The volume growth of Hindustan Unilever between April and June 2019 was at 5 per cent from 12 per cent last year. Britannia was down to 6 per cent against 13 per cent last year.
The government feels the wrath of the slowdown too. The government expenditure generally forms around 10-11 per cent of the Indian economy. The growth in government expenditure was at 19.1 per cent and 13.2 per cent in the last two years, the highest since the financial crisis years. This played a pivotal role in driving economic growth to some extent.
For 2019-2020, the government expenditure needs to increase and tax growth is the engine of government expenditure. It is challenging as from April to June 2019, the gross tax revenue of the government went up by just 1.4 per cent compared to 22.1 per cent during the same period last year.
Net exports is defined as value of exports minus the value of imports. This figure for April to June stood at -$46 billion whereas the net exports for April to June 2018 were -$46.6 billion. Clearly, there hasn’t been any increased economic activity on the exports front either as exports and imports during the period were at similar levels as last year. The growth in exports hit a 41-month low in June this year, as all major foreign exchange-earners like petroleum oil, gems and jewellery, and engineering goods recorded poor performance.