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DBS's Radhika Rao described India's economy as half empty and half full amid mixed signals
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India's Q2 GDP grew 8.2%, exceeding Bloomberg's 7.4% estimate, showing fastest growth in six quarters
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IIP growth slowed to 0.4% in October, below the 2.5% Bloomberg forecast and September's 4%
DBS Bank Ltd. Executive Director and Senior Economist Radhika Rao compared the present situation of the Indian economy with a glass which is half empty and half full.
India's GDP expanded 8.2% in the July-September quarter of the current financial year, the fastest growth in six quarters. The Bloomberg estimate was 7.4%.
The GDP data comes at a lag. So, the current data is still showing the picture of July–September. After taking out the statistical impact, the deflector impact, there are some positive developments, especially on the consumption front, where a bit of lift was noticed. The full impact of GST 2.0 was not reflected in those numbers, Rao said in an interview to NDTV Profit.
In October–December, similar factors will be noticed. Inflation numbers or deflector numbers could slip into negative, which means the growth numbers are going to look strong. Basically, for three consecutive quarters, the GDP figure will have some amount of distortion, she said.
A bit of disconnect was in high-frequency number. The Index of Industrial Production was a bit disappointing as compared to consensus, she said.
The IIP stood at 0.4% in October, the lowest in 14 months, according to data released by the Ministry of Statistics on Monday. The Bloomberg estimate was 2.5%. In September, the IIP grew 4%.
GST 2.0 announcement came in mid-August. In late September, the actual rate cuts took place. Those would have impacted productions, Rao said.
There was a dip earlier as people were deferring consumption in anticipation of rate cuts. On the manufacturing side, inventories build up. Amidst all of this, there was festival season, which is naturally a strong period. However, Rao said that the festive period was different from last few years. India also dealt with unseasonal monsoons during this period. Rao preferred to read the IIP numbers in this context.
Labour-intensive sectors have shown weaker production trends. The impact of tariffs, which came into effect in August and increased in September, has begun to show in the number. Rao suggests waiting for October and November numbers to get clear picture while keeping in mind that IIP is usually a volatile number, she said.
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