India’s early economic data for November combined with October data indicated some green shoots, noted ANZ in a research report. Most of the good news was seen in consumption indicators where a rise in diesel and petrol and a fall in auto sales, bode positively. Air passenger traffic further rebounded in October. Rural wages also rebounded in September.
Nevertheless, activity and investment indices continue to be soft. Industrial production dropped for the third consecutive month in October and exports continue to underperform. Only PMI surveys showed a respite in this category.
The deceleration in manufacturing growth continues to be seen in the sluggish performance of investment indicators, most of whom underperformed compared to six months ago. Of special mention here is the 23.2 percent year-on-year fall in new investment proposals in October.
“Overall, we remain cautious on a material improvement in growth in H2 FY20. Together with a sharp increase in inflation, weak growth prospects are at least temporarily giving rise to a stagflationary situation. However, we expect inflation to begin to cool off from Q2 2020 as food prices subside”, said ANZ.
In all, the Indian economy is yet to indicate any gains from the easing of monetary policy. Fiscal policy will need to do much of the heavy lifting for growth.
“We also see an end to the Reserve Bank of India’s easing cycle early next year”, added ANZ.
