India Economics_ India Trendspotting #5

Summary of Key Points from the Conference Call Industry Overview - The report focuses on the Indian economy, particularly high-frequency economic indicators for January 2025, indicating a mixed but gradually improving trend in economic activity [1][2]. Core Insights and Arguments - Monetary and Fiscal Policy: The combination of monetary easing and increased fiscal spending is expected to support economic growth in the upcoming months [1][2]. - High-Frequency Data Trends: - GST collections reached INR 1.96 trillion, marking a 12.3% year-over-year growth, the highest in nine months, compared to 7.3% in December [6]. - Central government capital expenditure (capex) rose to INR 1.7 trillion in December, a 95.3% increase year-over-year, significantly higher than the average of INR 640 billion from April to November [6]. - Manufacturing PMI increased to a six-month high of 57.7 in January, driven by higher export orders, while services PMI decreased to 56.5, the lowest since November 2022 [6]. - Credit growth improved to 11.5% year-over-year as of January 10, up from 11.2% in December [6]. - Vehicle registrations for two-wheelers showed recovery, while passenger vehicle registrations slightly moderated year-over-year [6]. - The Naukri Job Index grew at a slower pace, influenced by base effects [6]. - Air passenger traffic remained robust, and consumer sentiment showed resilience, although power demand weakened to 2.5% year-over-year in January [6]. Important Trends to Monitor - Government Spending: Continuous monitoring of both revenue and capital expenditure trends is crucial [3]. - Agricultural Output: The winter crop (rabi) output will be tracked to assess food price volatility and rural demand strength [3]. - Domestic Liquidity: Observing domestic liquidity and financial conditions is essential for understanding economic stability [3]. - External Environment: The impact of trade and tariff developments, as well as the Federal Reserve's actions, will be significant [3]. Additional Insights - The government aims to maintain its capex at 3.1% of GDP for FY2026, while also investing in social infrastructure [2]. - The expected rate cut of 25 basis points on February 7 is anticipated to further stimulate growth [2]. - The strength in services exports is seen as a positive indicator for employment prospects [2]. Conclusion - The Indian economy is showing signs of recovery, supported by strong government spending and improving high-frequency indicators. Continuous monitoring of these trends will be essential for assessing future growth prospects and potential investment opportunities.