The government on Friday officially announced that growth in India’s gross domestic product (GDP) — the total value of all goods and services produced in the country —crashed to 5%, the lowest in 10-years.
But, how do you spot an economic slowdown without poring through reams of statistics put out by the official number crunchers? I’'s simple. Look around you: when did your neighbours last dine out, is your boss getting into a car pool, is the class prima donna sporting last season’s fashion, does your friend extol the virtues of unsmart phones?
Households putting off spending are the early warning signals for the onset of an economy-wide squeeze. The clearest indications are available in any market or mall.
“I and wife had planned to buy a new car last Diwali, we deferred it expecting decent salary hikes. But neither of us has got a bonus this time around and the raise too was below what we had expected. So, we postponed the decision,” said Anuj Anand, a Mumbai-based mid-level executive working in a multi-national company.
Anand’s views fits smack into the latest official data.
The growth in the index of industrial production — the closest approximation for measuring economic activity in India’s business landscape —crawled at 1%, the slowest since 1991-92.
Consumer durables’ output fell 4.5% during March, clearly mirroring what most shop-end evidence was throwing up. Spend on television, refrigerators and cars since autumn continue to remain muted, squeezed by high prices and low-income growth.
The fact that automobile sales contracted 6.7% in 2012-13 versus a 2.2% growth in the previous year supports the view that the erosion in purchasing power, on account of persistently high inflation and interest rates, is denting discretionary spending.
Latest industry-wide data supports this view.
One-in-five dealers in India expect to take a financial loss in 2013, more than double the number compared with 2012.
Only 44% of dealers expect to make a profit for the 2012-2013 financial year, according to the JD Power Asia Pacific 2013 India Dealer Satisfaction with Automotive Manufacturers Index (DSWAMI) StudySM released on Friday.
"Declining profitability for dealerships in India not only highlights the impact that the slowdown in new-vehicles sales has on the viability of a growing number of dealers, but also underlines the importance placed on automakers to provide adequate support to their respective networks," said Mohit Arora, executive director, JD Power Asia Pacific, an automotive consultancy firm.
The latest national income data show that construction output grew at a sub-par 4.4%, services output slipped to 6.6%, the lowest since the global financial crisis of 2008. Sliding growth in the "community, social and personal service" category, which is a proxy for government spending, was the main driver.
"This likely reflects the finance minister's squeeze on departmental spending tightly in the final six months of 2012-13 to ensure that the government's deficit target was brought back into play," said Richard Iley, chief Asia economist, BNP Paribas.