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India’s economic slowdown is showing some signs of bottoming out, with six of the sixteen high-frequency indicators in green (above the five-year average trend) as of December, according to the latest edition of the Mint Macro Tracker. In November, only three indicators were in green.

The tracker, which was launched in October last year, provides a monthly state-of-the-economy report based on trends across the 16 indicators. A majority of the indicators still continued to be in the red (below the five year average trend). In December, nine indicators were in red, while one maintained trend. This is a deterioration compared to last year when seven indicators were in red and three maintained trend. This is the seventh month in a row when half or more of the 16 indicators were in the red.

The consumer economy scorecard saw a marginal improvement with one indicator (tractor-sales growth) turning amber in December. For the past ten months, all four indicators of the consumer economy - passenger vehicle sales, tractor sales, broadband subscriber base, and air passenger growth - had been flashing red.

Domestic air passenger growth also improved in December, turning positive after 10 months but it remained below the five-year average trend. Passenger vehicle sales growth and broadband subscriber growth also remain in red, showing little signs of improvement. Passenger vehicle sales declined 13% on year - contracting for the eleventh straight month in December, while broadband subscriber growth at 29% was way below the five-year average of 56%.

The producer economy scorecard also showed improvement with two of the four indicators now in green. The composite Purchasing Managers Index (PMI) and rail freight traffic both emerged in the green, showing improvements from their November levels. The other two indicators - core infrastructure industry growth and non-food bank credit - remained in red. As per the latest available data, core infrastructure industries contracted for the fourth consecutive month in November (-1.5%) but the contraction softened compared to the previous two months. At the same time, growth in non-food bank credit declined to a 25-month low of 7.2% in November.

The external sector score-card also saw an improvement last month with three indicators - import cover, exchange rate movement and trade deficit (as per cent of total trade) - in green. The labour-intensive export indicator, however, remained in the red because of continued contraction in such exports in December.

While economic activity presented a mixed picture with some sections of the economy showing signs of improvement and others slipping further into slowdown, inflation shot up above the RBI’s upper bound of 6% in December.

“Specific vegetables such as onions have played an outsized role (in pushing inflation up)," said an ICICI-Securities Primary Dealership report dated 14th January.

“..Core inflation also crept higher (to 3.8% in December from 3.5% in November). But the silver lining is that core inflation could have instead declined if the impact of higher telecom tariffs and more expensive auto fuels had not coincided," states the report. The full impact of telecom tariff increase may show up in January’s numbers (due next month), pushing up core inflation higher to over 4%, the report added.

Higher inflation also seems to be pushing pressure on real rural wages which contracted slightly in October after growing modestly for the previous fourteen months. This could further weaken rural consumption and exacerbate the slowdown in India’s rural hinterlands.

Overall, despite some signs of improvement, the economic momentum still remains weak. All eyes will now be on the upcoming budget to help steer the economy on a course of revival.

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