Whalesbook
India's Advance Business Index (ABI) fell to 100.8 in April, a three-month low. This shows a notable slowdown in economic momentum compared to February's peak. The shift to softer growth is increasingly driven by external pressures and rising commodity costs.
Crude Oil's Impact
The surge in crude oil prices is a key risk. India's crude basket averaged $114.48 per barrel in April, up from $113.49 in March and significantly higher than $69.01 in February. While the ABI doesn't directly measure crude prices, their impact is clear. Diesel consumption growth slowed sharply to 0.9% from 8%, and aviation turbine fuel consumption contracted. Coal production also fell 9.7%, down from a 1.5% decline.
Consumer Spending Slows
The slowdown was widespread across consumption and industrial indicators. Four-wheeler sales, a proxy for urban demand, slowed to 11.6% from 25.8%. Two-wheeler sales growth also eased to 13% from 29.5%. E-way bill generation, reflecting logistics activity, slowed to 11.8%, and credit card payment growth moderated, indicating weaker discretionary spending.
Pockets of Resilience
Despite the broad slowdown, some sectors remained strong. PMI Manufacturing improved to 55.9, and PMI Services rose to 57.9. UPI transaction volumes grew 24.9%, and non-food credit expansion grew to 14.9%. Tractor sales rose significantly, up 24.5%, indicating sustained rural demand.
Growth Outlook
The data shows a two-speed economy. Financial activity, digital payments, and parts of the rural sector are strong, while energy-linked sectors, urban consumption, and job creation are softening. The April reading indicates the economy started the fiscal year with less momentum. Sustained high crude prices could fuel inflation, hurting purchasing power and corporate margins. This could shift the economy from expansion toward consolidation.