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Indian economy’s animal spirits got worse as slowdown spilled into July

A gauge measuring overall economic activity moved one notch toward weaker territory as 6 of 8 high-frequency indicators fell from previous month.

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Mumbai: Weakness in India’s investment and consumption activity worsened in July, with economic growth showing little signs of recovery from a five-year low.

A gauge measuring overall activity moved one notch toward weaker territory, as six of the eight high-frequency indicators compiled by Bloomberg fell from the previous month. Car sales slumped the most in almost two decades and latest data showed infrastructure sector output grew at the slowest pace in more than four years.

The weakening came about a month before Finance Minister Nirmala Sitharaman announced a slew of steps to revive Asia’s third-largest economy. While the measures boosted market sentiment, they are expected to fall short of spurring growth.

The dashboard measures “animal spirits” — a term coined by British economist John Maynard Keynes to refer to investors’ confidence in taking action — and uses the three-month weighted average to smooth out volatility in the single-month readings.

Here are the details of the dashboard:

Business activity

After contracting in June, India’s purchasing managers index for services rebounded into growth territory in July. The index rose to 53.8 from 49.6 in June, with the upturn in business activity linked to the budget presented in early July and improved work orders. A reading above 50 indicates expansion.

Manufacturing activity also picked up, a separate PMI survey showed, pushing the composite index to an eight-month high of 53.9 in July from 50.8 in June.

Input cost inflation was muted, with only a negligible proportion of companies increasing selling prices in July. That should give the central bank enough leeway to pursue an easy monetary policy bias in the coming months, after having lowered benchmark rates by 110 basis points so far this year.


Merchandise exports grew in July from a year ago following a contraction in June. Still, the pace of exports growth was modest, dampened by a decline in gems and jewelry and engineering goods, and the outlook is clouded by a gloomy global economic picture and rising U.S.-China trade tensions.

Consumer activity

Consumer spending showed continued signs of stress. Car sales fell 36% from a year earlier to 122,956 units in July, the most since December 2000, data released by the Society of Indian Automobile Manufacturers showed. Passenger vehicle sales slumped 31%, while truck and bus sales fell 26%.

Weak sales are forcing manufacturers to cut production or shutter factories temporarily, leading to at least 15,000 job losses in the industry so far, Vishnu Mathur, the director general of Siam, said.

The prospect of job losses and slowing growth saw consumer confidence drop further in July, according to a survey by the central bank. Consumption, which contributes nearly 60% to gross domestic product, has been largely hurt by a shadow banking crisis, and that in turn has dragged growth down to a five-year low.

Data due Friday will probably show India’s gross domestic product expanded 5.7% in the quarter ended June, slower than the 5.8% pace seen in the previous three months.

Sluggish consumer spending and tardy investment is keeping demand for bank loans in check. Overall credit growth was pegged at 12.2% in July, down from 14.2% at the beginning of April, according to central bank data.

The Citi India Financial Conditions Index, a liquidity indicator, showed overall conditions were improving in July after remaining fairly tight in April, May and the early part of June.

Industrial activity

India’s core infrastructure industries’ output, which constitutes 40% of total industrial production, rose 0.2% in June from a year earlier. That was the slowest pace of expansion in more than four years, as four of the eight components — crude oil, natural gas, refinery products and cement — contracted.

Industrial output growth eased to 2% in June from 4.6% in May, with production of consumer durables and capital goods weighing down activity. Both the numbers are reported with a one month lag.

Also read: Rupee set for its worst monthly loss in 6 years and there’s more pain to come


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  1. Towards the last ten days of August , 2019 , the Government of India has woken up to deal with the slowdown in economy. Finance Minister announced some measures to stimulate spending. Now , RBI is said to have decided to release a huge amount of money to ease the situation. But these one after other measures suggest that Government also has strong perception of the slowdown already set in the country. In this context , it is apt to refer readers to this Vedic astrology writer’s predictive alerts in article – “ The year 2019 astrologically for India” – published last year 2018 on 7 October at The predictive alert for more care and appropriate strategy reads like this in the article :-
    “ February –March onward in 2019……………….Some sort of crisis or worrisome concerns in financial and economic sector look to be there.
    July to September in 2019. These three months may also call for more care and appropriate strategy against floods , landslides , etc. Over reaction may not drag us to war or wastage. Distribution of central finances may be disputed by a State or States. Liabilities or restrictive complexion of the past policies may weigh heavily on the success or completion of the ongoing ambitious projects , particularly those related to energy generation. Positive aspect is that well meaning group or persons may spring up to share power in Indian mainstream of politics or well-meaning powerful nations may support India”.
    These predictive alerts were followed by more through article – “ World trends in April to August 2019” – brought to public domain widely in March and subsequently on 5 April in 2019 to say that during period of four months and a half from mid- April to August , particularly June and around , in present year 2019 , more care and appropriate strategy was called for in relation to something like this for India as well :-
    “ 1. Economic and financial aspects may reflect major worrisome concerns.” These alerts were reviewed by this writer sometime in May 2019 and it was found that the aforesaid worrisome concerns may reach out as far as mid- October in 2019 with particular focus on period from about 7 August to 9 October in 2019 in India as well. And within that , 25 September to 9 October ( 28- 29 September ) needs closer attention. Having said that , it may be observed that human more care and appropriate strategy has weight over planetary impacts or energies for trends. So no alarm for panic or depression should be read into these predictive alerts

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