Key Economic Indicators Show No Slowdown But Unseasonal Rains Play Dampener
There are no signs of a slowdown from March to April, but there was some sequential moderation because of seasonality.
Despite continuing resilience, some high-frequency indicators have shown a sequential decline in April because of unseasonal rainfall.
Although some high-frequency indicators, such as the Purchasing Managers Indices, continued to stay strong in April, others, such as foreign trade, e-way bill collections, and vehicle sales, showed a sequential moderation.
"Most of the available high-frequency indicators recorded a deterioration in their year-on-year performance in April 2023, relative to March 2023, partly on account of the unseasonal rainfall seen during the month," said Aditi Nayar, chief economist at ICRA Ltd., who forecasts industrial output to grow at less than 2% in April after growing by 1.1% in March.
There are no signs of a slowdown from March to April, but there was some sequential moderation because of seasonality, according to Teresa John, an economist at Nirmal Bang Institutional Equities.
Besides, unseasonal weather reduced demand for air conditioners and other summer-linked consumer durables and contributed to lower stocking by FMCG companies in April. According to data from Bizom, demand for fast-moving consumer goods declined in April due to lower stocking by kiranas, John said in a note. Urban areas witnessed a sharp decline of 10.2% year-on-year, while rural areas saw a fall of 7.6% year-on-year.
Unseasonal rains in North India have temporarily affected sales of ACs, refrigerators, and air-coolers, according to the Consumer Electronics and Appliances Manufacturers Association. The East and South regions have seen good growth till April because of no weather disruptions there. In West India, sales have been flat, John from Nirmal Bang said, quoting CEAMA.
Merchandise Trade
India's trade deficit fell to the lowest since September 2021, to $15.2 billion in April, led by weaker global growth and a consequent dip in commodity prices. Merchandise exports fell to $34.66 billion, declining by 12.7% year-on-year and by 9.7% month-on-month. Merchandise imports fell 14.1% year-on-year and 14.1% month-on-month to $49.9 billion in April 2023.
Manufacturing PMI
Rising from 56.4 in March to 57.2 in April, the seasonally adjusted S&P Global India Manufacturing Purchasing Managers’ Index indicates the fastest improvement in the health of the sector year-to-date. Pre-production inventories rose at a record rate as firms scaled up input buying due to buoyant demand.
Services PMI
Rising from 57.8 in March to 62.0 in April, the seasonally adjusted S&P Global India Services PMI Business Activity Index signalled the fastest expansion in output since mid-2010. Anecdotal evidence linked the upturn to a pick-up in new business growth and favourable market conditions, as stated in the press release, along with a strengthening in business sentiment.
E-Way Bill Collections
E-way bill collections rose 12.2% over a year ago in April, compared to 16.3% in March. On a sequential basis, collections fell by 7.1%.
Petrol And Diesel Consumption
Demand for petroleum products saw mixed trends in April. Demand for petrol in April was down 2.9% year-on-year compared with a rise of 6.8% in March, according to data from the petroleum planning and analysis cell. However, demand for diesel rose by 8.6% in April, compared with a rise of 1.2% in March.
On a sequential basis, the demand for petrol fell by 7.4% from March, while the demand for diesel was flat.
Vehicle Sales
Vehicle sales started fiscal 2024 on a subdued note by registering a 4% decline year-on-year in April, according to data released by the Federation of Automobile Dealers Associations.
Although the three-wheeler segment enjoyed robust growth of 57% year-on-year, the tractor and CV segments grew by a modest 1% and 2%, respectively. Meanwhile, the two-wheeler and passenger vehicle categories fell by 7.3% and 1.4%, respectively.
The two-wheeler segment's continued low sales can be attributed to limited supplies, untimely rains, and pre-buying in March, the note by FADA stated. Model mix availability, rural sentiment, and demand in the two-wheeler motorcycle segment remain weak, the note said, adding that the rural economy is yet to show significant progress.
The passenger vehicle segment, which achieved record sales in FY23, slowed down in April, primarily due to last year's high base and changes in emission norms, which led to an increase in vehicle prices and advanced purchases in March. Although supplies are improving, there is a significant mismatch between customer demand and available inventory, according to FADA. Furthermore, entry-level passenger vehicles have fewer buyers, suggesting that customers at the bottom of the pyramid are still hesitant to upgrade from two-wheelers to four-wheelers.
Unfavourable weather conditions persist in May, including untimely rains and hailstorms, causing crop damage in multiple states, the note said. This exacerbates concerns for farmers and may potentially impact entry-level two-wheeler and passenger car sales.