How deep is India’s economic mess?:
Context:
- Hindustan Unilever chief executive Sanjiv Mehta said that rural demand for its products has been weak because of the lingering effects of demonetization as well as the farm crisis.
- Larsen & Toubro group executive chairman Anil Naik said that private sector companies are not in a position to launch new projects because of the excess debt they have on their balance sheets.
Reasons for slowdown:
- Sharp slowdown in quarterly growth due to inventory destocking by companies before implementation of the goods and service tax (GST).
- Technical problem of the deflators used by government statisticians to convert nominal output growth to real output growth.
Manufacturing Purchasing managers index (PMI):
- It moved into expansion territory in August after the slump in July.
- The data for cement, coal and steel continues to be disappointing.
- Foreign trade offers a ray of hope.
- The high frequency indicators suggest that economic growth in the second quarter could see recovery from the disappointing levels of the first quarter.
Present growth:
- Growth in gross value added has come down from 8.7% in the quarter ended March 2016 to 5.6% in the quarter ended June.
Asian Development Bank (ADB) data:
- According to the recent data released by the Asian Development Bank (ADB) offers some clues on the current state of the Indian business cycle.
- The Indian economy bottomed out in the third quarter of 2013, according to ADB.
- The subsequent upturn in the business cycle has lasted 14 quarters, higher than the average business cycle upturn of 12 quarters but lower than maximum of 18 quarters.
- High-frequency data suggests that the Indian economy could see a small recovery in the second quarter of the current fiscal year while business cycle data shows that the cyclical expansion could be running out of steam.
