India’s Economy Sends Mixed Signals as Businesses Juggle War and Trade Shocks
Welcome to India Edition, Bloomberg’s daily dive into what’s moving the worlds of business, markets and politics in this dynamic, fast-paced economy. I’m Menaka Doshi. If you didn’t receive this directly in your inbox, you can subscribe here, and share feedback with us here.
Today, I look at how the economy is holding up and my colleague Satviki Sanjay examines state-owned generic drug program Jan Aushadhi’s foray into skincare.
Exports Offer Hope
The latest economic and earnings data show Indian businesses building up inventories as they contend with supply shortages and trade restrictions, even as input costs remain elevated and domestic demand comes under pressure.
Industrial production surged 7.3% in June from a year earlier, up from a revised 5.1% in May and 2.2% a year ago. The increase was driven largely by strong growth in manufacturing and electricity.
Advance data for July showed the HSBC flash composite purchasing managers’ index declining to 54.3 from 57.1 in June, marking the weakest expansion in private-sector output since March 2022. New export orders rose at a faster pace, however, and firms continued to hire.
Indian manufacturers built inventories in April and May to hedge against the risk of energy and input shortages. A “similar front-loading dynamic” is now visible in the June industrial production and July flash PMI data, HSBC economists said in a report Wednesday.
Meanwhile, corporate earnings for the April to June period have been reassuring, according to QuantEco economists, with revenue growth holding up even as higher input costs and limited pricing power hurt profitability in some sectors. Still, a slow start to government capital expenditure, a slump in new project announcements and a deficient monsoon are weighing on the growth outlook, they said in a report today.
Exports remain a structural bright spot. Shipments to markets other than the US grew about 21% in the first quarter, helped by geographical diversification and newer free-trade agreements, QuantEco said. India’s placement in the bottom 10% tier of the new US Section 301 tariffs may also give its exporters a relative advantage over some competitors.
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