Delhi, India: As business conditions improved in December, India's economy picked up speed, marking a rebound for the South Asian nation that had been showing signs of slowing down earlier in the month.
As 2022 came to a close, the needle indicating so-called animal spirits moved after remaining constant for five consecutive months, indicating stronger overall economic activity. Tax collection increased as a result of consumer spending, manufacturers showed optimism for the future, and new businesses opened in the services sector.
India's finance minister Nirmala Sitharaman is scheduled to highlight India's potential to grow at a world-beating rate in the year beginning in April at the budget's unveiling on Feb. 1. The third-largest economy in Asia has performed better than many developed nations, many of which are experiencing recessions this year.
On the way ahead, India still has some weaknesses. Two of the last three months have seen a decline in exports, making it difficult for a number of businesses to secure new work from important overseas markets. As businesses passed on higher input costs and business expenses, finished goods prices increased. India's unemployment rate increased marginally, and banks observed a decrease in credit demand, among the eight indicators that Bloomberg monitors.
A three-month weighted average is used to smooth out volatility in single-month readings in Bloomberg's animal spirits barometer. Here are additional details:
Business activity A survey of purchasing managers revealed robust manufacturing and service activity in December. The composite index rose to its highest level in 11 years. The amount produced increased significantly. Manufacturing saw the fastest increase in new orders since February 2021, and service businesses saw an increase in new orders for the seventeenth consecutive month in December.
According to Pollyanna De Lima, an Economics Associate Director at S&P Global Market Intelligence, "While some may question the resilience of the Indian manufacturing industry in 2023 amid a deteriorating outlook for the global economy, manufacturers were strongly confident in their ability to lift production."
According to trade ministry data, although exports decreased by 12.2% in December when compared to the same month last year, they remained at a three-month high in value at $34.5 billion. According to Commerce Secretary Sunil Barthwal, exports are still competitive.
The gap in trade for the second month narrowed to $23.76 billion as imports decreased by 3.46 percent from the previous year. India's import bill has decreased as a result of lower commodity prices and a general weakening of the dollar. However, the country's exports may not be able to recover from the record-high current account gap that existed between the quarters of July and September.
The banking system's liquidity tightened, and bank credit slowed to 14.9% in December, down from 17.2% in November. The 225 basis point increase by the Reserve Bank of India slowed demand for consumer goods, automobiles, and housing. Nonetheless, loan growth of double digits was a significant improvement over the single digit expansion that occurred from September 2019 to March 2022.
The economy's consumption is measured by the collection of goods and services taxes, which increased by 15%. For the past ten months, revenue collected has been greater than 1.4 trillion rupees. According to information provided by the Federation of Automobile Dealers Associations, the month's new vehicle registrations increased by 8.2%.
Sentiment in the market Electricity consumption, a popular indicator of industrial and manufacturing sector demand, increased from the previous month. At the end of December, peak demand increased to 171 gigawatts, up from 162 gigawatts a month earlier. Additionally, as job creation failed to keep up with a growing workforce, India's unemployment rate reached a 16-month high of 8.3%.