India’s Steady Economic Recovery Braces for Ukraine War Risks


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.

Stable Activity

The Indian economy was in a steady state before geopolitical tensions erupted.

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% 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.

Below are details of the dashboard. (For an alternative gauge of growth trends, follow Bloomberg Economics’ monthly GDP tracker — a weighted index of 11 indicators.)

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 growth broadly remained unchanged in February, growing 25.1% from a year ago. Imports, however, surged more than 36% 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% 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.

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

Industrial Activity

Factory output growth picked up, rising 1.3% 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% of the industrial production index, moderated to 3.7% in January from a revised 4.1% in December. Both reports are published with a one-month lag. (Bloomberg)