There are some visible signs of moderation in the growth of the Indian economy. A study by HSBC Global Research showed that 55% of the economy continues to grow, against 65% a quarter ago.
To get a read on the state of the economy, HSBC studies 100 indicators of growth, and maps them to various sectors, both on the production and the expenditure side. Looking across sectors, HSBC Global Research highlighted that a majority share (more than 50% of the indicators) in agriculture, industrial finance, investment, and government spending remain positive.
On the other hand, indicators of consumption across both rural and urban India, as well as consumer finance are softening.
“All indicators for mining and utilities have weakened, and trade and transport remain soft,” the study showed. “A breakdown of manufacturing also showed weaker consumer goods production (even as construction goods remain strong),” HSBC Global Research said.
What next? HSBC Global Research believes that the growth exuberance over the past few years was led by the rise of several high-tech sectors (‘new India’). The exuberance in electronics manufacturing, Global Capability Centres, and digital start-ups, led to high growth and incomes at the top of the pyramid.
“After a few heady years, the base is rising, and growth in these sectors is normalising to more sustainable levels. Overall GDP growth is gradually converging from over 7% levels to a more sustainable but still strong ‘potential growth’ level of 6.5%,” HSBC Global Research said in a report on November 14.
Sector wise, the report highlighted that 60% of the indicators in the agriculture sector are positive at present compared with 50% in the last quarter. On the other hand, 50% of indicators on the manufacturing side look positive compared with 75% in the previous quarter.
“Erratic rains through the monsoon season hurt production and lowered the buoyancy in the sector. But the season ended with normal temperatures (post the March-May heatwave), and strong rains filling up the reservoirs, bringing in better growth in the current quarter. And if no major shocks hit again, agricultural production could rise further over the next six months,” HSBC Global Research said adding that within manufacturing, investment and construction goods are on a strong footing, but consumer goods are weaker.
The research firm added that those who had hoped that the over 7% growth numbers of the last few years were the new normal, will likely have to recalibrate expectations, and the equity market may well be in the process of that.
Amid the ongoing correction on Dalal Street, the benchmark equity index BSE Sensex has tanked nearly 8%, down 6,608 points, to 77690.95 on November 13, 2024 against 84,299.78 on September 30, 2024.