Hearing the Faint Pulse of India's Growth - WSJ.com
Indian customers purchase fruit from a roadside stall in Siliguri on Jan. 15, 2014. Agence France-Presse/Getty Images
India's economy is slowly on the mend, or that is the tale the traditional data for economic output are telling. Nontraditional figures offer a less optimistic story.
India will report its gross domestic product Friday. The total likely grew 4.9% in the December quarter from a year before, according to a survey of economists by The Wall Street Journal. That is at least slightly better than the 4.8% and 4.4% achieved in the preceding quarters, but far below the high-single-digit growth rate of years past.
Official GDP gives an incomplete picture. Half of India's commerce and 90% of its workers are part of the informal economy, more than in any part of the world except sub-Saharan Africa, says Credit Suisse. CSGN.VX +0.25% The government's estimates of what informal businesses sell are poor.
So like Chinese Premier Li Keqiang, who is famous for focusing on Chinese bank credit, electricity consumption and rail-freight volume instead of unreliable GDP figures, investors in India should consider a broader range of indicators.
Start with cash for transactions. When adjusted for India's high consumer-price inflation, growth in a narrow measure of money supply has stayed mostly flat for the last six months, according to Morgan Stanley MS +1.40%calculations. This suggests there is hardly extra underlying demand for transactions.
Growth in cement production, a staple in everything from infrastructure to many rural houses, fell to 2.3% in the last quarter of 2013 from a year earlier, well below the 20-year average of 7.6%, according to the Centre for Monitoring Indian Economy.
Next, consider motorized transport. The passenger-car market shrank last year and continued with declining sales in January, as buyers were squeezed by rising interest rates. Sales of scooters and motorcycles, common in rural India where the farm economy has benefited from good rains, are growing—but growth, as measured by the three-month moving average, slowed to 5.6% in January from 14.4% in October, according to data provider CEIC.
India's demand for electricity actually contracted between November and January from the year before, a tough feat considering population growth. Rail freight expanded 3.9% year-over-year on average during the same three months, according to CMIE, slower than forecast GDP growth.
All these indicators point to an Indian economy far from out of the woods. Investors are pinning their hopes on May's elections to alter the landscape. They should keep in mind that the economy any new government inherits will be a sluggish one, no matter how you measure it.
Write to Abheek Bhattacharya at abheek.bhattacharya@wsj.com
Indian customers purchase fruit from a roadside stall in Siliguri on Jan. 15, 2014. Agence France-Presse/Getty Images
India's economy is slowly on the mend, or that is the tale the traditional data for economic output are telling. Nontraditional figures offer a less optimistic story.
India will report its gross domestic product Friday. The total likely grew 4.9% in the December quarter from a year before, according to a survey of economists by The Wall Street Journal. That is at least slightly better than the 4.8% and 4.4% achieved in the preceding quarters, but far below the high-single-digit growth rate of years past.
Official GDP gives an incomplete picture. Half of India's commerce and 90% of its workers are part of the informal economy, more than in any part of the world except sub-Saharan Africa, says Credit Suisse. CSGN.VX +0.25% The government's estimates of what informal businesses sell are poor.
So like Chinese Premier Li Keqiang, who is famous for focusing on Chinese bank credit, electricity consumption and rail-freight volume instead of unreliable GDP figures, investors in India should consider a broader range of indicators.
Start with cash for transactions. When adjusted for India's high consumer-price inflation, growth in a narrow measure of money supply has stayed mostly flat for the last six months, according to Morgan Stanley MS +1.40%calculations. This suggests there is hardly extra underlying demand for transactions.
Growth in cement production, a staple in everything from infrastructure to many rural houses, fell to 2.3% in the last quarter of 2013 from a year earlier, well below the 20-year average of 7.6%, according to the Centre for Monitoring Indian Economy.
Next, consider motorized transport. The passenger-car market shrank last year and continued with declining sales in January, as buyers were squeezed by rising interest rates. Sales of scooters and motorcycles, common in rural India where the farm economy has benefited from good rains, are growing—but growth, as measured by the three-month moving average, slowed to 5.6% in January from 14.4% in October, according to data provider CEIC.
India's demand for electricity actually contracted between November and January from the year before, a tough feat considering population growth. Rail freight expanded 3.9% year-over-year on average during the same three months, according to CMIE, slower than forecast GDP growth.
All these indicators point to an Indian economy far from out of the woods. Investors are pinning their hopes on May's elections to alter the landscape. They should keep in mind that the economy any new government inherits will be a sluggish one, no matter how you measure it.
Write to Abheek Bhattacharya at abheek.bhattacharya@wsj.com
