The Indian economic outlook improved in April, with the Leading Economic Index (LEI) rising by 0.7%, says The Conference Board. At the end of April, the LEI stood at 178.1 (2004=100).
Of the eight components that make up the LEI, seven of them contributed positively in April.
April saw the second successive month’s increase in LEI, with the largest positive contributions coming from stock prices, bank credit to commercial sector, and merchandise exports. During three of the first four months of 2014, the LEI has improved.
Seven positive components
Below are the seven components that made a positive contribution to LEI, in order of size:
- Merchandising exports,
- M3: bank credit to commercial sector,
- The SENSEX stock prices index,
- PMI: services business activity,
- The real effective exchange rate (36 countries),
- Industrial production: capital goods,
- Interest rate spread.
Cargo handled remained the same in April.
Despite April’s gain, the LEI fell by -0.1 between October 2013 and April 2014, better than the -1.1% decline (approximately -2.1% annual rate) for the previous six months. Over the six month period up to the end of April, the strengths and weaknesses among the leading indicators were balanced.
(Source: The Conference Board)
April Coincident Economic Index (CEI)
The CEI, which is a measure of current economic activity, declined by 0.9% in April, after rising 0.8% in March and falling 1.6% in February.
Between October 2013 and April 2014, the CEI fell by 1.2% (approx. -2.4% annualized), the same rate of decline as during the previous half-year.
Of the four components that make up the CEI, two increased:
- Exports of agricultural products
- Industrial production
The following CEI components made a negative contribution in April:
- Total imports
- Passenger vehicles
(Source: The Conference Board)
GDP growth slowed down
India’s real GDP (gross domestic product) expanded by 5.6% (annualized) in Q4 2013, slightly less than the 5.7% registered in Q3 2013, which had slowed compared to the previous quarter.
Jing Sima, Economist at The Conference Board, said:
“April’s gain in the Leading Economic Index for India was driven by improvements across most of its components. Exports and service sectors improved, while stock prices and bank loans both surged.”
“Although the six-month change in the LEI turned slightly negative and the Coincident Economic Index remains weak, both have improved significantly from 2013’s steep declines, suggesting that the current slowdown in the economy may be bottoming out.”
Bart van Ark, Chief Economist at The Conference Board, said:
“The sharp month-over-month improvement in the LEI indicates strong momentum for a recovery in India later this year. While there are still many risks and uncertainties, the post-election environment might provide a breeding ground for bold policy initiatives that can bank on the green shoots we are observing in the LEI.”
