Indices Of India’s Economic Recovery In July Are Contradictory

As India’s third-largest economy struggles to cope with high inflation, rising borrowing costs, and fears of a global recession, there have been mixed signs of improvement in consumer and business activity in July

As India’s third-largest economy struggles to cope with high inflation, rising borrowing costs, and fears of a global recession, there have been mixed signs of improvement in consumer and business activity in July.

Following weaker sales growth and rising inflation, the purchasing managers’ report revealed that India’s services fell to their lowest level in four months in July.  India’s international service demand deteriorated, counterbalancing the country’s strong manufacturing growth.

The S&P Global India Composite PMI Index fell to 56.6 in July from 58.2 in June as the services sector posted moderate business outlooks. 

The Export Industry 

During the third quarter, India’s trade deficit expanded owing to weak global demand and a tax on fuel shipments, which account for approximately 15 per cent of exports. 

Since the rupee has been weaker than the other Asian currencies in the previous three months, imports have remained near record levels. Approximately one-third of India’s imports are crude oil, accounting for approximately 8 per cent, and coal, accounting for approximately 12 per cent.

Aspects Of Consumer Activity

Two-wheeler sales were up for the second consecutive month despite broad-based growth across all segments. As a result of semiconductor shortages, supply has improved, but automakers warn that the costlier loans may cause a decline in demand.

At the end of July, bank credit reached 14.5 per cent, its highest level in over three years, despite rising interest rates. The banking system’s liquidity remained surplus.

The Industrial Sector

The onset of the monsoons reduced electricity consumption and coal production in June, which negatively impacted factory output and core sector activity. The Index of Industrial Production rose 12.3 per cent in May, reaching a one-year high. As a result, eight of the most important infrastructure industries reported a drop in growth from 19.3 per cent the previous month to 12.8 per cent this month. A one-month lag separates both sets of data.