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India: 100 indicators of growth

  • Article
  • We mapped 100 indicators of growth across various Indian sectors …
  • … and found that a majority of areas were continuing to expand
  • As growth normalises to more sustainable but still strong levels, it could become more broad-based

What’s the verdict?

Mixed messages. After a period of heady stock market gains in India alongside impressive GDP growth clips, things seem to have cooled off a bit. A barrage of recent data releases have given mixed messages. Meanwhile, India GDP prints have their own issues, with economists debating complex technical questions on how the statistics should be presented. So, what’s really going on?

Mapping growth. To get a clear read on the state of the economy, we brought together 100 indicators of growth, and mapped them to various sectors, both on the production side (agriculture, industry and services) and the expenditure side (exports, investment and consumption). We used a wide variety of data and focused on sequential momentum to get a thorough picture of growth.

Still positive overall. We found that most of the economy (55%) was continuing to expand. Granted, this is down a little from three months ago, when around 65% of areas were growing, and this moderation is likely affecting sentiment.

Some sector improvements. Looking across sectors, we find that a few were doing better now than in the previous quarter. Agriculture had come off a disruptive period of heatwaves and sluggish rains. Government spending had risen post elections, across both current and capex accounts. The latter was boosting investment growth. In fact, credit to industry was growing quickly (even though it was more working capital than term loans). And diversification of the export basket towards professional services was helping to hold up export growth.

Some sectors softening. On the other hand, with the weather normalising, power demand and growth in mining and utilities had softened. Trade and transport remained laggard sectors, even though tourism was doing well. Finally, and most notably, consumption demand was weaker across both urban and rural India. In fact, a breakdown of manufacturing also showed weaker consumer goods production, even as construction goods remained strong.

Overall GDP growth is gradually converging to a more sustainable but still strong level

What next? We believe the growth exuberance over the past few years was led by the rise of several high-tech sectors, sometimes called ‘new India’. The exuberance in electronics manufacturing, Global Capability Centres, and digital start-ups led to high growth and incomes at the top of the pyramid. However, after a few heady years, the base is rising, and growth in these sectors is normalising to more sustainable levels. Overall GDP growth is gradually converging from 7%-plus levels to a more sustainable but still strong ‘potential growth’ level of c6.5%. If the improved prospects for agriculture stick, this new growth clip may be more equitably spread.

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