Ahead of the festive season, India’s overall economic activity, as measured by the CareEdge Economic Meter (CEM), showed muted expansion year-on-year in September, but gained momentum on a sequential basis.
The CEM was at 116.2 in September, marginally up by 0.2% on year, but 3.1% higher than 112.7 in August.
The CEM — which considers FY19 as the base year — is a composite index covering 18 high-frequency economic indicators to track the state of the economy on a real-time basis.
The 0.2% growth in September’s CEM was the lowest in at least one year.
“The early start of the festive season last year and the post-pandemic spurt in demand as it was the first Covid-free festive season in three years resulted in a high base which has weighed on the CEM growth number,” CareEdge said.
“Additionally, a sharp annual contraction in imports, corporate debt issuances and tractor sales contributed negatively to the CEM growth,” it said.
Among the 18 high-frequency indicators, seven contracted year-on-year in September; while in August, only five had contracted.
Tractor sales, merchandise imports, and debt issuances contracted sharply by 15.6%, 16.3%, and 23.0% year-on-year, respectively, in September. Whereas, power consumption, Services PMI (Purchasing Managers’ Index), E-way bill issuances rose by 10.3%, 12.3% and 9.5%, respectively.
“Corporate bond issuances contracted sharply (19%) in September. It was the second consecutive month of contraction owing to elevated bond yields due to a combination of factors like hawkish commentary by the RBI, higher global crude oil prices,” CareEdge said.
On tractor sales — a proxy for rural demand — CareEdge said weather-related irregularities and concerns around prospects of the Kharif harvest weighed on rural demand sentiments. The 15.6% contraction in sales was the highest in at least 12 months.
Looking ahead, as the festive season starts, automobile sales, e-way issuances, GST collections and robust services activity shall keep economic activity upbeat and drive growth.
The Reserve Bank of India has projected India’s economy to grow 6.5%, both in FY24 and Q2. In Q1, the economy had grown 7.8%.