Indian economy keeps its shine, with some red flags

livemint.com:

Mint's monthly EM tracker, buoyed by robust domestic growth and a sharp rebound in exports. The rupee's performance against the US dollar, while modest, outshone that of its peers, as did the achievements of the domestic stock market, enhancing India’s overall score. This solid standing, especially at a time when recession bells are ringing in Europe, is particularly advantageous for the Narendra Modi government as it approaches the Lok Sabha elections.

However, the recent weakening of the rupee, elevated food prices, and weak private consumption raise red flags. On the EM tracker, which ranks 10 countries on seven indicators, India stood out mainly due to the 8.4% GDP growth in October-December, 11.9% growth in exports, and 4% month-on-month rise in stock market capitalization. Scoring 83 out of 100, India significantly outpaced its closest competitors, the Philippines (65) and Brazil (64).

The EM tracker is one of two economy trackers run by Mint. In the second tracker, which tracks the economy’s performance over time, eight of 16 high-frequency indicators had a better reading in February than their five-year average trend (were in “green")—an improvement from January. These included the purchasing managers’ index, non-food credit, and inflation.

However, sharp declines in passenger vehicle sales (an indicator of urban demand) and tractor sales (an indicator of agricultural demand), and lack of steam in labour-intensive export sectors pose concern. Despite bouts of volatility, India's stock market has emerged as one of the best performers globally this financial year, propelled by consecutive strong GDP figures. A surge in global equity markets, especially in the US, has further contributed to this momentum.