The economy is showing positive effects from recent policy actions, as per a report by BNP Paribas India. Various indicators like credit and deposit growth, industrial activity, and consumption-related metrics have improved. Consumption indicators, including auto sales, fuel consumption, and consumer sentiments, remain strong, supported by government focus on consumption through fiscal and monetary policies.
Urban consumption indicators, such as vehicle sales, fuel consumption, deposit growth, and airline passenger traffic, have seen increases. Rural indicators are mixed due to factors like positive GST rate cuts and good monsoon but may face challenges from low agri-realization in the short term. However, rural indicators are recovering post a weak festival season in October, with improvements in agricultural exports, tractor sales, and reservoir levels.
The report forecasts a positive turn in food inflation this quarter due to base effect dynamics, supported by the government’s emphasis on consumption. Industry and services sectors are also rebounding, with credit and deposit growth, higher airline and port activities, robust PMI readings, and increased government expenditure. Industrial production has risen post the festive season, with strong manufacturing output, new order growth, and cement production.
Capital expenditure for the year seems front-loaded and may moderate in the upcoming months, according to the brokerage analysis.
