Indian Economic Growth 2020: Are we recovering?

It’s a heartwarming to hear to know the latest on Indian economic growth. Firstly, after contracting continuously for six months on the trot, the exports of India’s made a sudden turnaround and grew in September. The growth pace in Indian exports was marginal at 5.27%. But under such circumstances, any growth is welcome. However, Indian imports have been reduced to 20%, which is not good news for the Indian economy. Scrolling, down to read the latest related news on Indian Economy and Indian economic growth of late.

Indian Economic Growth 2020: Is the Economy recovering?

There are a lot of talks about Indian Economic Growth in 2020. But with the economic slowdown, is the Indian economy recovering? According to the chart below, Indian exports have reached figures of 98.4% in September, while Indian imports have also risen but at a much slower pace of 73.7%.

Indian Economic Growth

 

Indian Economic Growth – What’s happening in the Automobile Sector?

There is some positive news coming up in the Indian automobile sector. The Maruti Suzuki car manufacturing company has registered a 34% hike in sales for the month of September. The company has sold most cars in the last two months. Many Indian automobile companies, along with some global players like the Hyundai, Honda and Mahindra have also improved their sales.

Hyundai registered 24% sales, Honda – 10% sales, and Mahindra – 3.5%. All saw positive growth even though some such as Toyota (minus 20%) missed out. Hero MotoCorp leads sales in the two-wheelers section. With the seeming resurgence in the Indian exports, automobile, Indian economic growth in this year and the next seems bright.

The demand for petrol also grew by 2% in the last two months. With the demand for petrol, there was a demand for personal conveyance over community travel as well. As a result, it reflects on the car sales too. But even there is a demand for petrol, the demand for diesel has fallen recently. This also reflects on the demand for a particular type of car.

Indian Economic Growth: Nikkei Manufacturing Purchasing Managers’ Index

The biggest news on the Indian economy is the Nikkei Manufacturing Purchasing Managers’ Index. This index is compiled by IHS Markit and is perceived as a proxy for all sorts of factory-level activity. The index has jumped from 52.0 in August to 56.8 in September. According to the index, above the 50-level in this index signifies growth.

On the contrary, if the index shows below 50, it signifies a contraction. According to Reuters, the Nikkei Manufacturing Purchasing Managers’ Index recorded the highest number since January 2012. This is another reason why it seems that Indian Economic Growth may look to surge.

All this news on the Indian economy, in the month of September, is completely opposite to the August 2020 report. The August report reflects the output of India’s eight core infrastructure, which declined by almost 9%. The reason for this decline to look worse is because of the fact it was compared to the non-existent growth in August 2019.

So, is the Indian Economic Growth looking to surge?

Well, is the Indian economic growth moving towards in the right direction now after a slowdown? The September facts are tempting, but the age-old wisdom is that “one swallow doesn’t make a summer.”

We all know what happened when there was a nationwide lockdown from late March to April. The chart below, according to Nomura, shows the pace of economic normalisation, reflects one essential point: The improvement rate in economic activity has decelerated with the passing of each month from May-August.

In some of the sectors of Indian economy, like the External sector (which is exports) and Industry (like – cement, steel etc.), the improvement rate was negative in the month of August. Take a look at the green circles in the graph below.

News on Indian Economy
Credits – NOMURA

People of India expected an improvement in the economy of India when the lockdown was over, and the country started to open. People were expecting the normalisation of the economy. But the facts and figures about the Indian economic growth are not inspiring.

According to Nomura economists, Sonal Varma and Aurodeep Nandi, the aggregate demand in August was still below 70% of the absolute potential, and the aggregate supply was little better at 85.7%. Adding to this, few other economists thought that the economic activity was not growing even by the end of September. 

For instance, according to the Nomura India Business Resumption Index or NIBRI, the below-mentioned chart includes inputs from the Google mobility indices, driving mobility from Apple, demand of power and the rate of labour force participation. All these inputs are used to prepare this weekly tracker of economic activity normalisation. The chart reflects a distinct improvement in the economy of India in the month of September. But there is also a dip that can be noticed by the end of September.

 

Credits – Nomura

You can look at another graph – SBI Business Activity Index. This graph too shows a stagnation in the economic activity.

But does that mean its again a disturbing news on Indian economy? Will Indian Economic Growth be stagnated or will be in the negative? Well, there is no direct answer, but the signs are encouraging as there is some growth in sales in the Automobile sector. Business is interlinked with various sectors, so, growth in one can pull growth in another. We, must rather cross our fingers and pray that things normalise without jumping to any conclusion.


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