India’s services and manufacturing activity held steady in February, even as the war in Ukraine clouds the outlook for prices and growth in the consumption-driven economy.

All eight high-frequency indicators compiled by Bloomberg News showed activity was steady last month, with the needle on a dial measuring so-called ‘Animal Spirits’ staying put at 5 for the eighth straight month. The gauge uses the three-month weighted average to smooth out volatility in the single-month readings.

The reading, which comes ahead of the Central bank’s monetary policy decision early next month, doesn’t capture the plethora of risks looming over the economy thanks to the Russia-Ukraine conflict. These include a surge in inflation amid higher energy and food prices, which could in turn dent disposable incomes in a nation where private consumption accounts for some 60 per cent of gross domestic product.

The Reserve Bank of India continues to be supportive of economic growth, Governor Shaktikanta Das said Monday, signaling above-target inflation is not as much of a threat to Asia’s third-largest economy at the moment.

Business activity

Purchasing managers surveys showed activity at Indian factories and service providers gained momentum as easing pandemic curbs saw demand return. That helped the composite index climb half a notch to 53.5 in February, with 50 representing the point between contraction and expansion. The rebound is, however, at risk of being reversed given the hit to sentiment from Russia’s invasion of Ukraine, according to Bloomberg Economics’s Abhishek Gupta. 

Exports

Exports growth broadly remained unchanged in February, growing 25.1 per cent from a year ago. Imports, however, surged more than 36 per cent on higher oil and gold purchase bills, widening the trade deficit to $20.9 billion from $17.4 billion in January.

Consumer activity

The slack in automobiles sector continued with passenger vehicle sales falling for a sixth straight month, declining almost 8 per cent in February. The pace of decline was slower than January, but industry associations see a global supply- chain disruption and semi-conductor chip shortage prolonging their woes. 

FILE PHOTO: A customer wearing protective mask pushes a trolley with grocery items past Reliance Jewels and Reliance Digital stores of Reliance Industries Ltd, in Mumbai, India, October 7, 2020. 

FILE PHOTO: A customer wearing protective mask pushes a trolley with grocery items past Reliance Jewels and Reliance Digital stores of Reliance Industries Ltd, in Mumbai, India, October 7, 2020. 

Other signs of consumer activity weren’t encouraging either with bank credit growth slowing to 7.9 per cent in end-February, from 8.2 per cent in the previous month. Liquidity conditions continued to remain in surplus.

Industrial activity

Factory output growth picked up, rising 1.3 per cent in January after hitting a 10-month low in December, aided by mining and electricity output. Output at eight infrastructure industries, which make up 40 per cent of the industrial production index, moderated to 3.7 per cent in January from a revised 4.1 per cent in December. Both reports are published with a one-month lag.

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