ICRA: India's economic activity shows mixed signals in June; key sectors struggle
India's economic activity showed a mixed picture in June, after a clear slowdown in May, according to a recent report by ICRA.
While electricity demand showed some improvement in June, daily average vehicle registrations continued to weaken compared to May.
Demand for two-wheelers and tractors is likely to improve on the back of rural sentiments, while urban consumption could get a lift from recent income tax cuts and lower borrowing costs, though limited product availability may hold back a stronger recovery.
India's overall economic activity in May had grown at 6.5% year-on-year, a drop from the 7.8% growth seen in April. The dip was largely due to a weaker performance across 10 out of the 15 key economic indicators tracked.
One of the biggest drags was the core sector output, which recorded a sluggish 0.7% growth in May, its lowest in nine months. The slowdown came largely from four of the eight core industries. Electricity generation, in particular, shrank by 5.8% due to unusually high rainfall in several regions.
Unemployment also edged up in May. The all-India jobless rate rose to 5.6% from 5.1% in April, according to the monthly Periodic Labour Force Survey.
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Rural areas saw the sharpest rise, likely as a result of the end of the rabi harvest season. However, ICRA said that comparing this year's labour market with last year remains difficult due to the lack of comparable data.
Other important indicators also reflected a slowdown. Electricity output dropped sharply by 8.6% year-on-year in May, down from a 1.9% decline in April. Coal India Limited's production returned to negative territory, slipping 1.4% after a gain of 0.5% the month before.
Mobility and transport indicators painted a similar picture. GST e-way bill generation growth dropped to 18.9% from 23.4%. Domestic air passenger traffic slowed to 4.1% from 8.5%, and diesel consumption moderated to 2.2% from 4.3%. Passenger vehicle production growth was halved to 5.4%, while non-oil exports also grew just 5.1%, down from 10.3% in April. This slowdown also weighed on cargo traffic at ports, which eased to 4.3% from 7.0%.
Despite these setbacks, a few indicators offered signs of stability. Two-wheeler production turned a corner, rising 4.9% in May compared to a 4.1% decline the previous month. Petrol consumption jumped to 9.2% from 5.0%, benefiting from a favourable base. Vehicle registrations picked up slightly to 5.4% from 3.8%, while finished steel consumption improved to 7.8%, up from 6.0% in April.
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