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Core sectors in reverse gear

Core sectors in reverse gear
Highlights

In India, the talk of economic slowdown is getting louder by the day.

In India, the talk of economic slowdown is getting louder by the day. The fears of slowdown turning into a prolonged recession seems to be real owing to unprecedented fall in sales of automobiles, including cars, commercial vehicles and two-wheelers.

Slowdown in two-wheelers signals rural distress as rural heartlands drive their sales. Grim commercial vehicle sales are the loudest indicator that all is not well with the economy and it's going to be a long haul before the country witnesses green shots in growth corridors.

'Lipstick Index' also seems to point towards economic slowdown in India. The index came to light during 2000 global meltdown when Leonard Lauder, former chairman of US-based cosmetics major Estee Lauder, observed that lipstick sales would go up during recession as woman substitute lipsticks for expensive dresses and shoes during downturn.

So far, lipstick sales in India bucked the slowdown. This trend may taken as an indicator for slowing economy even thought majority of Indian women don't use lipstick. But housing sales painted a declining trend.

A study by realty consultant Anarock revealed that housing sales in top seven metro cities fell by 18 per cent to 55,080 units during July-September this year from 67,140 units in the same period (Q2) a year ago.

Interestingly, Bengaluru, the IT capital of India, saw the biggest fall as sales there declined a whopping 35 per cent to 10,500 units in last three months. Hyderabad registered second highest fall of 32 per cent year-on-year to 3,280 units.

Other cities that saw sales decline include Delhi, Mumbai, Kolkata, Chennai and Pune. This housing sales decline provides an interesting read.

Barring Hyderabad and Bengaluru, all other cities have been going through downturn in realty for the past couple of years. Hyderabad witnessed a golden run when it comes to real estate in last couple of years.

Decline in Hyderabad real market, which suffered due to Telangana agitation from 2011 to 2015 before picking up, means bad news realty across India.

Further, there are other signals as well. Eight core sectors posted contraction in August. This contraction happened for the first time after four years.

As per official statistics out on Monday, production of core sectors comprising coal, crude oil, natural gas, cement, refinery products, fertilizers, steel and electricity declined by 0.5 per cent in August 2019 against 4.7 per cent growth in the same month a year ago.

The production of coal, crude oil, natural gas, cement and electricity fell by a whopping eight per cent. That means these core sectors are going the way of auto sector in which major auto makers drastically cut down production in the last one year.

The central government has continuously been announcing one stimulus package after another for the past few weeks, with an aim to spur economic growth in the wake of GDP upswing hitting six-year-low of five per cent in first quarter this fiscal.

Going by the core sector numbers, stimulus measures are yet to yield positive results. The festive season which kicked off this week will decide whether the country crash lands into recession.

No consumption growth in festive season means economy will further decelerate! That will be bad news for the country.

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