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India Economy Report: Thus far, a lot further to go

Publication Date: 13 Jun 2019 - By Manika Premsingh By Manika P.

Environmental, Social & Governance Macro Investment Strategies Multi Asset Asia ex-China


A decisive mandate in NDA’s favour in the latest Indian general elections is a clear indicator that the government is perceived as having delivered in the 2014-19 term, and is expected to continue to do so yet again. This report takes an unbiased look at the economic performance over this time period and highlights the segments that need attention over the next five years.

Economy Assessment: 2014 to 2019

The assessment is based on my proprietary Macro Meter rating (see Chart), geared to provide a quick and effective stance on economic performance by giving a birds’ eye view of trends in major economic indicators. It divides the economy under five key heads (detailed below), each of which is given a point based rating from which the overall rating is then derived.

The highlights are as follows:

  • The overall rating stands at 4.5 out of 5 points, indicating that the economy is better off than in 2014; with 2.5 points being the mid-way mark indicating an economy neither better nor worse off.  
  • The overall Economic Activity rating took a beating despite strengthening growth. The pick-up in GVA growth was driven by sharp industrial recovery, some improvement in services and despite diminished agricultural growth. The corporate sector, underperformed during 2017-18 dragging down the overall rating.
  • External Sector performed well, as both merchandise exports and imports rose. The trade deficit is higher, but is adequately covered. Foreign Direct Investments increased, indicating faith in the economy’s potential. Foreign portfolio investments disappointed with an outflow in 2018-19 due to global macro trends. External borrowings have grown, but not ballooned out of control.
  • Inflation has seen good management, with a drastic drop in both consumer and wholesale price inflation. Importantly, the quarterly house price inflation has dropped notably too, a positive for real estate activity.
  • Financial Sector has significantly improved from 2014 when credit growth was crawling at low growth, due to careful bank lending. Pick-up in activity has aided it, however. Deposit growth picked up too, a sign of rising disposable incomes.
  • On Survey Indicators, both consumers and business are more optimistic, and sentiment’s impact on real activity cannot be underestimated. Capacity utilisation is also improved.

Looking ahead: 2019 to 2024

So far, so good. But further growth acceleration is required, possibly in the following focus areas:

  • Evidence of weak corporate sector performance continues into 2019, indicating the need for intervention across both industry and services, especially the former.
  • More trade buoyancy will support growth. Assessing effectiveness of existing trade agreements, enhancing them and forging new ones can be the next steps forward.  
  • Re-consideration of the balance between growth in and controls on financial services can give the economy a fillip. In this regard, the composition of both domestic credit and external borrowings needs to be carefully monitored to ensure productive channelisation.
  • Proposed measures like the Producer Price Index and the Index of Services Production should be prioritised to allow for more frequent monitoring of the economy.


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