India: Broad-based economic slowdown – ABN AMRO

Arjen van Dijkhuizen, senior economist at ABN AMRO, points out that India’s economic growth has cooled sharply since mid-2018.

Key Quotes

“After hovering around 8% yoy in 1H18, real GDP growth has continued to slow, reaching a six-year low of 5.0% yoy in Q219. This slowdown is broad based. Next to domestic factors, the deterioration in the external environment plays a role as well. India is less directly exposed to the global business cycle than China and other east Asian countries, but it is not immune to the global slowdown in GDP growth and trade.”

“Growth of fixed investment dropped from double digit levels last year to 3.5-4% yoy in the first half of this year, as business confidence has weakened (partly reflecting election uncertainty) and lending growth has slowed. India’s manufacturing PMI has dropped by more than three full points since the start of the year, to 50.6 in October.”

“Private consumption has also slowed materially, from 7-8% yoy during 2018 to 3.1% yoy in Q219, partly reflecting weaker consumer sentiment and the impact of higher taxes. The drop in car sales (around -30% yoy in July-September) is illustrative for the fact that the Indian consumer has become much more cautious, although some bottoming out is visible recently. Weakness in the car sector is a global phenomenon too.”