Exports remained subdued, although the 1.1% year-on-year contraction in October was shallower than the previous month’s 6.6% decline.
A worrying sign, however, was the anemic non-oil and non-gold imports that suggest weak domestic demand conditions. A fifth straight month of decline in capital goods imports signals subdued investment spending.
India observed its biggest religious festival, Diwali, in October, when shoppers usually spend on food and gifts. This year, festival sales were relatively subdued.
More than 90% of storekeepers indicated footfalls were lower than last year, according to research by Bank of America Merrill Lynch analysts.
Car sales fell 6.3% in October from a year ago -- the 12th straight month of decline -- after plunging 33% in September, according to data released by the Society of Indian Automobile Manufacturers. Two-wheeler sales were down 14.4% from a year earlier while demand for trucks and buses were down 23.3%.
While loans were up in absolute numbers, growth in bank credit has slowed to around two-year lows amid sluggish demand from companies. Banks have also been reluctant to pass on recent rate reductions to customers, hindering loan growth.
The spread between the RBI’s key policy rate and the weighted average lending rate on outstanding loans from commercial banks is near the highest in data going back to February 2012.
Financial conditions, as indicated by the Citi India Financial Conditions Index, improved during the month, but that didn’t make a huge difference to loan demand.
India’s factory output shrank by 4.3% to the lowest level in eight years in September, weighed down by a sharp fall in capital goods production. It’s likely that industrial production might struggle more in the coming months.
The index of eight core infrastructure industries, which feeds into the index of industrial production, declined 5.2% in September from a year ago -- its steepest drop in 14 years. A contraction in production in sectors like coal, steel, electricity and natural gas meant overall demand was weak. Both the core sector and industrial output numbers are reported with a one-month lag.
©2019 Bloomberg L.P.