The HSBC MarkIT PMI for China and UK has already ticked to 51 and 50.6 already while US and India are still faster and higher at 54-55. the official PMI for India was above 55 as well, which is much better than any other global economy. However the concern it raises is the same, that our trade deficit at $15 billion caused by an import bill of $40.9 bln is stilla tougher story than the growth

As the pitch has slowed down considerably, India is paying dearly for Industrial growth. While manufacturing stays around 6%, the uptick in infrastructure has maintained hopes for India and the MarkIT PMI on tuesday might well signall a bullish Economy. But as Auto sales falter, the Oil import bill continues to drag India down and even create a winbdow for fiscal and monetary rebalancing much more than the hawkish anti inflation stance adopted by RBI and MoF

A commonplace yet very effective analysis from the India WSJ team threads it together thus: 

 

In April the trade deficit had narrowed to $8.98 billion from $11.03 billion a year earlier.

Last month, federal trade secretary Rahul Khullar said he would be concerned if the trade gap continued to remain as wide as May for the next two months.

"The big increase [in the trade deficit] is clearly not sustainable and could lead to volatility in the Indian rupee and can make the economy vulnerable to existing and potential external shocks," said Jay Shankar, chief economist at Religare Capital Markets.

India, which imports nearly two-thirds of its oil requirements, is witnessing a consistent rise in non-oil imports.

Falling Oil prices may take another 6 months to even more to make a dent in India's Oil basket price and the reliance on gas is not yielding much results either. Mangala fields expansion may also be a far cry under the new royalty scheme as Vedanta opts to consolidate its new fief. However, our own fuel stocks and a constraint on retail consumption might well answer our fiscal troubles albeit with a necessary retail downtick in the GDP.

 

Posted via email from The investment blog on Post