The Indian economy looks set to regain its lost standing as the world’s fastest growing major economy, outpacing China after having swiftly recovered from the disorderly effects of demonetisation and goods and services tax (GST).
Shelves in shops are emptying faster than ever and companies are working to add capacity to meet additional consumer demand. Hiring appears to have picked pace and production of key intermediate products such as steel and cement has hit multi-year highs.
News 18 Network’s two-day Rising India Summit, to be held on March 16-17 in New Delhi, could not have come at a more appropriate time. The world is once again looking towards India as the primary engine to aid incipient global recovery.
An array of speakers including Prime Minister Narendra Modi, President of the Republic of Gabon, Ali Bongo Ondimba, Nobel laureate Paul Krugman, experts from the field of finance, industrialists and film stars will share their views on a range of subjects in the two-day marquee event in New Delhi.
India’s “real” inflation-adjusted gross domestic product (GDP) grew 7.2 percent in the December quarter, as against 6.5 percent in the previous quarter (July-September). And it is only likely to get better in the current quarter (January-March) if recent data is any indication.
High frequency indicators like industrial output data also point to a broad-based recovery. Factory output, measured by the index of industrial production (IIP), grew by 7.5 percent in January compared to 7.1 percent in December, and 3.5 percent in January last year.
The growth in IIP was primarily driven by robust expansion in the manufacturing and power generation sectors. Some analysts now expect IIP growth to touch double-digits in February, which would be the first time it did so since October 2010.
“We expect that February 2018 IIP growth might be in double digits,” said Soumya Kanti Ghosh, Group Chief Economic Adviser, State Bank of India.
In January, the manufacturing sector, which accounts for around 75 percent of India’s factory output, grew 8.6 percent and power generation grew 7.6 percent. Capital goods output grew by 14.6 percent, which could well be a sign of growing investment activity.
Consumer durables and consumer non-durables have recorded growth of 8 percent and 10.5 percent, respectively. Out of 23 industry groups in the manufacturing sector, 16 have shown positive growth during January 2018 as compared to the corresponding month of the previous year.
This is a remarkable turnaround from a few months back when a mid-year switchover to goods and services tax (GST) prompted anxious shop owners and companies to de-stock and clear up their inventory piles ahead of the new system being implemented.
Companies had significantly cut back production in June 2017 as part of a business strategy to carry over as little old stock as possible into July. Nobody was quite sure whether prices will rise, fall or remain the same after GST, which partly explains the jostle to drain out old stocks at heavy price markdowns.
The scaling down of production had a bearing on the overall GDP growth numbers, pulling it down to a 13-quarter low of 5.7 percent in the quarter-ended June. The decidedly V-shaped recovery since, however, seems to mirror a sustained turnaround.
“The pick-up in industrial activity is likely to continue. The growth momentum is likely to carried forward even in the months of February and March 2018 which will probably be driven by favorable performance of the capital goods, especially auto industry. Consumer durables are also likely to support the growth,” said Madan Sabnavis Chief Economist at CARE Ratings, a credit rating and research agency.moneycontrol