An initial glance at India’s third fiscal quarter GDP data may have proved mildly disappointing for some. However, looking into the deeper details of the report shows a brighter picture than might have been expected. In addition, the data is backward looking and not overly indicative of what the future holds for India’s economy. This week, we take a closer look at the data and consult more timely measures and assessments of India’s economic performance.
Last week India’s Central Statistics Office (CSO) published the latest GDP figures for the country, which showed growth slowed to 6.6% in the final three months of 2018, the third quarter of India’s fiscal year.
The initial reaction was of disappointment, as the number was below the median estimate for GDP to grow 6.7%. Added to that was the downward revision to GDP growth in the previous quarter; the CSO now calculates GDP grew by 7% in the second quarter of India’s fiscal year cycle, down from the 7.1% increase previously reported. However, the report also contained some positive details, particularly with regards to investment activity.
Separately, more timely survey data on the country’s manufacturing sector along with a broadly upbeat assessment from Moody’s Investor Service also provided brighter news on an economy that is still expected to grow at a rate above that of the broader global trend, for some years, thanks to increasingly business friendly policies and the continued urbanisation of a country with a population of around 1.34 billion.
India’s third quarter GDP details
The details of the GDP data showed a mixed performance across the country’s shifting economy. Growth in the agricultural sector proved a disappointment, as it was notably weaker when compared with GDP from the previous year. The manufacturing sector also posted a slower pace of growth.
Other sectors were much more promising for the future outlook of the country, including strong readings from the construction and the financial and real estate professional services sector.
Meanwhile, the report also showed that average per capita incomes, were higher than the previous year. Add to that, higher levels of consumer spending and investment, along with stronger exports levels and the overall picture of India’s countrywide economic performance in the third fiscal quarter, is indicative of broad health.
In addition to the detail highlighting strength across India’ economy, was the news that despite a weaker than expected reading and a downgrade to the second quarter growth number, other economies are slowing too. That shows that while India is being affected by other global issues, so far it hasn’t lost as much momentum – or looking likely to – as some other countries have.
But, as we know, while the GDP numbers provide plenty of interesting details on India’s economy, it is a backward-looking assessment. Other, more timely surveys and assessments, proved that despite a situation which has resulted in a tough period for many farmers and led to the Government creation of a financial relief package for them and difficulties with Pakistan, the Indian economy remains in a promising position.
Manufacturing growth expands, growth seen steady
The latest manufacturing purchasing managers index from IHS Markit, meanwhile, which was published just hours after the GDP data, showed that activity in the sector grew at the fastest pace in 14 months. Orders, output and employment across the manufacturing industry were all upbeat, providing a boost.
But that wasn’t the only up-to-date piece of positive news on India’s economy. In its latest Global Macro Outlook, Moody’s Investor Service predicted stable economic growth for the country over the next two years. That was despite its view for the global economy to weaken across 2019 and 2020.
As asset investment managers with a specific interest in India, we pay close attention to all relevant details about the country’s economy, plans, Government and investment-related news and opportunities. We know that the final months of 2018 weren’t quite as strong for India as previous quarters. However, policy makers are also acutely aware of this and that detail was among the reasons for the recent interest rate cut – action that will likely be repeated in a few months.
For Prime Minister Narendra Modi, the headline GDP data was likely considered a bit of a blow, coming as the 2019 General Election approaches. As we’ve detailed though, it’s not the only measure to take notice of.
Investment in India remains strong and not surprisingly, worthwhile opportunities are developing all the time. Whether you’re interested in eco-friendly assets, modular construction possibilities or infrastructure related options, India is currently a real land of opportunity for investors and will be for some years to come.
Red Ribbon CEO, Suchit Punnose said:
The latest CSO release of India’s third quarter fiscal GDP are a case in point. The headline number was a little disappointing. However, the details showed key areas performed well and are primed to remain economically supportive going forward. Overall, India’s economy is in a stronger position than other major countries, which is good news for existing and prospective investors.
We continue to identify the best investment opportunities for ourselves and our clients and believe there are many more years of positive investment outcomes across India, ahead of us.