How will Indian economy do in 2019? 'Animal spirits' hint to a tame start

Economy & Policy

India’s economy started the New Year still hungover from the sluggish showing in end-2018, stoking expectations for more monetary stimulus from the central bank.
A set of indicators tracked by Bloomberg to measure “animal spirits” -- a term coined by British economist John Maynard Keynes to refer to investors’ confidence in taking action -- showed weaker indicators outnumber stronger ones 4-3 in January. A pullback in exports and business activity weighed on sentiment.

While India’s inflation-targeting central bank cut interest rates earlier this month to prop up economic growth, Governor Shaktikanta Das kept the door open for more when he noted that “growth impulses have weakened and there is a need to spur private investment and strengthen private consumption.”
While a rates review is scheduled for April, a pulse check for the economy is due later Thursday, when the government will release gross domestic product data for the quarter ended December. As of Wednesday, economists forecast expansion to have slowed to 6.8 percent from 7.1 percent in the previous quarter.

Here’s a breakdown of what the indicators suggest:

Business Activity

The seasonally adjusted Nikkei India Composite PMI Index was unchanged at 53.6 in January. While the manufacturing sector was in robust shape, the dominant services sector, which contributes more than 50 percent of GDP, showed signs of cooling.
A key factor that kept a check on services activity was a softer expansion in new work, with companies noting only a moderate increase in sales.

Exports

On a sequential basis, exports declined in January from a month ago. While shipments grew 3.7 percent on an annualized basis, economists doubt the pick up

 will be sustained as the global economy slows...Read More