INSUBCONTINENT EXCLUSIVE:
Demand for services and manufactured goods slowed in August.India is beginning to feel the heat of global trade tensions and tighter
monetary conditions at home, as rising oil prices and waning consumption threaten to muzzle animal spirits in the world's fastest-growing
major economy.Demand for services and manufactured goods slowed in August, while a cross-section of high-frequency indicators compiled by
Bloomberg News suggest economic growth may moderate in the coming months from an 8 percent-plus pace in the quarter to June
The business activity tracker, which feeds into the dashboard's overall reading, dialed back a notch to the third-highest rating from
second previously.A debt crisis at a local lender and a cash crunch in the banking system add to the risks to the economy that's dealing
with costlier oil and a weaker rupee.Here are the full details of the dashboard:Business ActivityIndia's main services index expanded in
August at the slowest pace in three months as both new orders as well as hiring slowed
The Nikkei India Composite PMI Output Index retreated from July's near two-year high, mirroring weaker growth in both the manufacturing
The services sector accounts for about 55 percent of India's gross domestic product.More worryingly for the Reserve Bank of India, input
cost inflation rose to its highest in nine months, although output prices remained more or less stable.The central bank's six-member
monetary policy committee meets next week to decide on interest rates, having delivered two hikes since June
The swap markets are pricing in at least 100 basis points of rate increases in the coming months, which will take the repurchase rate to 7.5
percent.ExportsIndia's merchandise exports grew by a relatively strong 19.2 percent in August from a year earlier, helped by a weaker
Economists say sectors such as textiles, pharmaceutical and engineering goods are witnessing some benefit from a weak currency, although
imports -- especially costly crude -- are handily outpacing shipments abroad
That could see trade become an overall drag on growth.The talk of $100-a-barrel oil is bad news for India, the world's fastest-growing oil
consumer.Consumer ActivityData from the Society of Indian Automobile Manufacturers show that local car sales fell in August as rising cost
of loans and a sharp rise in domestic fuel prices likely put off buyers
That apart, devastating floods in the southern state of Kerala just before a key festival hit purchases
Nevertheless, commercial vehicles and two-wheelers sales were higher, underpinning a view that overall domestic demand is, for now, holding
up.Bank credit rose 13.5 percent in August from a year ago, with most of the loans being made to the services sector
But there is bad news in store for borrowers with the government increasing interest rates on small savings instruments
That is likely to see banks raise deposit rates and consequently lending rates to protect their margins.Bloomberg Economics' Abhishek Gupta
says that while India's bank credit, which accounts for about three-quarters of the funding extended to companies, is showing signs of
recovery, it's too early to conclude that the growth will be sustained."The pickup may partly reflect relaxed supply constraints at
public-sector banks following the resolution of certain large bad loan cases," he added.The Citi India Financial Conditions Index shows a
considerable tightening in the first three weeks of September as advance tax outflows crimped surplus funds in the banking system and
back-to-back rate hikes hit home
The index incorporates among other indicators, short-term money market rates, government bond yields (short and long tenor), the yield
curve, credit and credit default spreads.Economic ActivityForeign direct investments rose slightly in July
With a general election due in early 2019, concerns about policy paralysis and whether Prime Minister Narendra Modi will manage to repeat
his 2014 landslide-win is likely to keep many investors on the sidelines.Add to that, problems in India's financial sector, especially
those concerning shadow banks and state-run lenders, are likely to weigh on investors' minds.Industrial ActivityOutput of infrastructure
industries -- which contribute 40 percent to the industrial production index -- slowed in July
That was partly due to a decline in crude oil output, natural gas production and slowing down in the coal sector and electricity generation
Overall, the index for industrial production growth also slowed slightly to 6.6 percent year-on-year in July.(This story has not been edited
by TheIndianSubcontinent staff and is auto-generated from a syndicated feed.)
