There is a distinct slowdown visible in manufacturing growth in fiscal 2018-19 as it fell to a 3-year low. Even as the MOSPI declared negative IIP growth of (-0.1%) for April 2019, the full year Manufacturing growth for fiscal 2018-19 came in at a 3-year low of 3.5%. This is sharply lower than 4.6% growth recorded in fiscal 2017-18. Within the manufacturing space, the manufacture of automobiles and other transport equipment was a major loser on weak consumer demand. In the last few months, the capital cycle investments have taken a real hit due to weak demand.
Consumption slowdown may be a surprise to many, but not to FMCG industry veteran, Vinita Bali. The former CEO of Britannia underlined that there have been multiple indicators hinting at a slowdown in consumption over the last few months. Bali pointed out to certain key lead indicators like falling industrial production, weak capacity utilization, liquidity shortfalls, and fall in employment numbers as the key lead indicators of a consumption slowdown. The slowdown in consumables has been limited but the slowdown in consumer durables has been a lot sharper.
Trump may have played truant in the trade war but China remains optimistic on trade talks despite 25% tariffs hike announced by the US. In fact, a day after Trump imposed the 25% punitive tariffs on Chinese imports, China said that it was cautiously optimistic that trade talks should find a way out. However, China has also clarified that it would not compromise on matters of how China runs its economy. While dates are not set for further talks, China has reserved the right to take retaliatory measures on the US. The US had called upon China to undertake a major internal restructuring of the economy.
The International Energy Agency is quite clear that India would fail to meet its renewable energy targets for 2030. The IEA has raised doubts over India’s ability to install 175 GW of renewable power capacity by 2030 and make it constitute 40% of power generation. India is the second largest coal user in the world after China and 64% of the coal demand comes from the power sector. Annual growth in coal consumption will continue at 3.4% until the year 2040. Coal-based thermal power plants have been one of the biggest polluters of the environment in countries like India and China.
Nifty and the Sensex closed the week with 8 consecutive sessions of losses. These losses were exacerbated by the worsening trade war between the US and China after the US hiked tariffs on $200 billion worth of imports from China on Friday. FII selling also continued through the week and that put additional pressure on the Indian markets. It is estimated that globally, nearly $2 trillion of the market was wiped out post the Trump trade tweet. In the meanwhile, there are concerns on the FPI flows front too. In the month of May, the FPIs have already withdrawn $2 billion from Asian equity markets after $11 billion of inflows in April. FPIs are adopting a risk-off approach to Asian EMs since their currencies are vulnerable to a prolonged China-US trade war. Both India and Indonesia are seeing outflows in May.
In a rather abrupt move, the Competition Commission of India (CCI) has ordered an anti-trust probe into Google for abuse of the Android platform. According to Reuters, the Indian government launched an inquiry into allegations that Google used its dominant position of Android to block competition. Recently, the EU had also launched an anti-trust investigation into Google on the same lines and imposed a fine of $5 billion. Google has denied any abuse of power and stated that, on the contrary, Google and Android had helped connect millions of Indians via mobile.
