Empower Outlook

High frequency domestic growth indicators suggest weakness in consumption sector with soft data in consumer durables and nondurables production, auto sales, NONG imports and weak industry commentary.

- Mr. Kaustub Gupta

Growth Indicators

However, investment indicators like cement and steel, credit growth, capacity utilization, FDI inflows and PMI data remained decent. Traffic data (railway and airport) showed some moderation, but fuel consumption was decent.

Credit growth remains strong and the breakdown of banking credit is showing inching up of industries and strong growth in infrastructure segment. India composite PMI moderated somewhat in March at 52.6, after averaging 53.7 in the previous 5 months.

Global composite February PMI increased for the second consecutive month with unchanged m-m manufacturing PMI and further increase in services PMI. DM PMI declined further due to further weakness in Europe while EM PMI increased. The key highlight of the data was the healthy uptick in Chinese PMI which came at highest level since June 2018 with healthy rebound both in manufacturing and services.

External trade

Trade deficit for February declined sharply compared to January. On a y-y basis, exports remained weak but in positive zone, while imports declined by 4.2% y-y, with sharp decline in NONG imports. 3QFY19 Balance of Payment (BoP) data showed current account deficit improving marginally at 2.5% of GDP with overall BoP in deficit at US$4.3 bn taking cumulative FY19 deficit at 17.5bn. We expect improvement in BoP in FY20, due to stable government post- elections given the favorable global backdrop for EM flows.

Inflation