Early indicators suggest that slowdown has bottomed out in India.
The prolonged slowdown in India may soon fade away as early indicators suggest a revival of growth in manufacturing and services sector. While the country’s services PMI rose to a five-month high of 53.3 in December 2019 from 52.7 a month earlier, the manufacturing PMI improved to 52.7 points from 51.2 points in the same duration. The services output growth accelerated to second strongest rate in more than a year and employment condition is also improving. On the manufacturing front, rising new orders has helped to ramp up production. One major accomplishment among all these factors is that animal spirit has shot up.
“Early indicators suggest that the slowdown has bottomed out in India,” Sameer Narang, Chief Economist, Bank of Baroda, told Financial Express Online. While the service sector is now quickly recovering in India, manufacturing sector growth can be seen Asia wide, including India, Sameer Narang added.
Even amid a slowdown and social instability in the country, foreign investors are optimistic to invest their money as FDI in India’s market. FDI in the first half of the current financial year surged 17 per cent on-year to Rs 1.8 lakh crore from Rs 1.5 lakh crore, according to the Department for Promotion of Industry and Internal Trade (DPIIT). The FDI inflow in the second half of the fiscal year is further expected to rise.
“Going forward, there are expectations of further inflows in the FDI investment as India continues to remain one of the favoured destinations for the investment by foreigners. In the second half of FY20, we are anticipating FDI equity inflows to the tune of around USD 25 billion,” Care Ratings said in its report.
India’s consumer durables segment has also seen a major jump in the festive season and shot up. More buying has led to increased credit growth. The outstanding loans to the consumer durable segment stood at Rs 5,499 crore as on November 22, up from Rs 3,274 crore a year ago, data released by the Reserve Bank of India (RBI) showed.
Meanwhile, the growth of China has taken a hit after its services PMI fell to 52.5 in December 2019 from a seven-month high of 53.5 in the previous month. Export order growth in the country slowed while the employment gauge fell to the lowest since July, amid companies’ efforts to curb costs and boost efficiency. The animal spirit also edged down to the second-lowest on record, amid concerns over ongoing trade tensions, relatively subdued economic growth, and staff shortages.