The Organisation for Economic Co-operation and Development’s (OECD’s) composite leading indicator (CLI) for India for May points “strongly to a slowdown with economic activity falling below long-term trend”. CLI, which is supposed to anticipate turning points in economic activity, has a trend rate of growth set at 100, which means that the reading for May, at 97.8, is well below the trend growth rate. Moreover, there is no change of direction in CLI for India, as can be seen from the chart.
Naveen Kumar Saini/Mint
The chart shows CLIs for India from May 2008, when the financial crisis started to affect the economy. Note the rapid fall starting from June 2008 as the Lehman Brothers crisis erupted, down to a low of 97.8 in December 2008, and the equally rapid V-shaped recovery in 2009 on account of fiscal and monetary stimulus and due to capital inflows into the Indian market. However, the recovery started to run out of steam in 2010 and the CLI reading fell below 100 in April 2011. Since then, the downward journey has continued, albeit with a pause at the end of 2011. Significantly, May’s CLI reading of 97.8 is the same as during the depths of the Lehman crisis, in December 2008.
The only sprig of hope is that the month-on-month change in CLI in May, at -0.19%, is a mite lower than April’s -0.22% month-on-month change, or March’s -0.21% change.
The CLI readings for May “point to an easing of economic activity in most major OECD economies and a more marked slowdown in most major non-OECD economies”.
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