GROWTH ahoy! A raft of lead indicators, investments that refuse to flag, rejuvenated hiring, sprightly freight movement at major ports and robust data from key manufacturing segments indicate that the downturn has bottomed out and that the economy is poised to regain its vigour.
Nomura's Composite Leading Index (CLI), UBS' Lead Economic Indicator (LEI) and ABN Amro's Purchasing Managers' Index (PMI) all point to a pick-up in growth soon. And CMIE's capex database, which tracks investments by companies, shows no big slowdown in this space.
A lead indicator is a composite of a variety of indices that track activity in vital economic sectors.
And that's not all. The strong showing of sectors such as auto, cement, steel, capital goods, port traffic along with record telecom subscriber additions supports the strong turnaround thesis of these lead indicators.
After three months of rise on the trot, UBS' LEI index for India now stands at 2.1; it touched a low of -2.08 last December. The LEI is a composite indicator of variables like government bond yields, M1 money supply, currency risk premium, foreign exchange reserves and stock market gains.
UBS' economist Philip Wyatt expects a sustained recovery thanks to India's low levels of excess capacity, private sector indebtedness and non-performing loans. "With this significant rebound in LEI, we are more confident of a turning point in the industrial cycle by June 2009," says Mr Wyatt in a research report.
Source: Economic Times Economy Set To Turn The Corner Right Indicators
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By ugesh sarkar, Section Indian Economy
Posted on Wed Apr 29, 2009 at 02:16:26 AM EST
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ABN Amro's PMI--an indicator of the country's manufacturing scene based on a survey of 500 companies--has improved to 49.5 this March from 44 last December. A reading below 50 indicates contraction. The PMI jump to nearly 50 suggests that manufacturing has put the contraction days behind and is poised to enter an expansion phase. Allaying concerns all around
THE suggestion is that inventories have been run down, necessitating stepped-up production.
The economy can also take heart from the automobile sector. The number of cars sold in March at 1,66,837 was 45% higher than the 1,15,334 sold in December `08. Two-wheeler sales climbed 42% from 4,61,302 in December to 6,54,017 in March.
The index of industrial production, meanwhile, has inched its way to positive territory, even as capital goods production grew 10% in February.
And CMIE's capex database of new and ongoing investments indicates that both the rate of project announcements and the pace at which they are being commissioned remain robust. It says the downward revision of projected growth for this fiscal by the World Bank and IMF is baseless.
According to the database, the momentum in commissioning new projects will continue into the next fiscal. Over a 1,000 projects involving total investments of Rs 4,90,000 crore are on schedule and will be commissioned in 2009-10. Projects worth a record Rs 7,90,000 crore have been announced in the quarter ended March 2009 itself, suggesting that corporates haven't pared investments as expected.
As for trade data, despite overall imports slowing down, project import growth has remained robust (January saw a 200% surge). While portfolio investment inflows have been fickle, direct investment inflows remain strong, inducing official expectation that FDI inflows in 2009 would best last year's realised inflow of $33 billion and touch $40 billion.
This should put to rest fears of a slowdown "as a result of weaker investment" as suggested by the IMF.
That should also allay concerns over OECD's warning of a downside risk to India's growth trajectory. In its interim growth outlook, OECD has warned that in case "...firms do not take into account a likely turnaround by the end of 2009 and hence scale down their investment plans more than expected".
India's chief statistician Pronab Sen said, "Keeping in mind the fact that a majority of corporates have only deferred their investment plans and not scrapped them altogether, I would say if the global scenario improves, the growth rate in India will pick up at a fast pace."
Indeed, a survey conducted among manufacturers by industry bodies like Ficci shares this optimism. In the current quarter, prospects look better for the manufacturing sector with six out of 12 sectors-- textiles, metals & products, machinery, cement, FMCG and miscellaneous industry--likely to see a growth.
The prices of manufactured items, which have been firming up for the previous eight weeks after slipping from August, also hint at a demand revival.
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