BackTepid growth
Small macroeconomic steps towards fixing the economy are already visible
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Fixing the economy is the difficult task that awaits the next government. But some small macroeconomic steps towards that end are already visible.
The HSBC Purchasing Managers’ Index for manufacturing in April showed that growth remains tepid.
The index did not change from the previous month, but a glance at its components shows an increase in inventories, falling prices of inputs, and a slowing of new local and export orders. These are symptoms of weak demand.
Some level of demand cooling is required in the Indian economy to keep inflation in check before the central bank can lower interest rates. From that vantage, this is not exactly bad news.
The only cloud on the horizon is a possible weak monsoon. If that comes to pass, the ability of the central bank to cut interest rates may be tempered by the danger that prices of agricultural commodities may shoot up.
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