India’s economy remained sluggish in June, with the slowdown becoming more pervasive amid a slump in services and a plunge in exports.

Services activity contracted for the first time in 13 months, adding to India’s struggles in reviving consumer demand in everything from cars to bank loans. Eight high-frequency indicators compiled by Bloomberg News showed the economy lacked momentum, with the overall activity dot remaining unchanged from a month ago.

The dashboard is a measure of “animal spirits,” a term coined by British economist John Maynard Keynes to refer to investors’ confidence in taking action.

Given the absence of any fiscal stimulus in Finance Minister Nirmala Sitharaman’s budget this month, the onus is now on the central bank to spur growth that slowed to a five-year low of 5.8% in the first three months of 2019. The Monetary Policy Committee is due to decide on interest rates Aug. 7, when it will also review its 7% growth forecast for the current fiscal year that began April 1.

Here are the details of the dashboard:

Business Activity

India’s purchasing managers index for services signaled a contraction in the industry for the first time since May 2018, dropping to 49.6 last month. A reading under 50 indicates a contraction in an industry that accounts for more than half of the nation’s gross domestic product.

Manufacturing activity also weakened, a separate PMI survey showed, dragging down the composite index to 50.8 in June from 51.7 in May.

Input cost trends were more or less muted, with prices rising marginally across the two sectors, the surveys showed. Inflation remains subdued with latest data showing underlying price pressures—which strips out the volatile food and fuel costs—abating, as demand cooled.


Exports shrank nearly 10% in June from a year earlier, the worst contraction since January 2016, amid waning global demand and trade tensions, while imports fell 9.1% as oil prices dropped.

The underlying figures paint a worrying picture: imports of capital goods, such as transport equipment and machinery, were dull given weak domestic spending. That means a revival in India’s investment cycle is still far away.

Consumer Activity

Consumer spending showed little signs of a recovery. Passenger car sales fell 24% in June from a year ago—down for an eighth month—while heavy vehicles like trucks dropped 12%. Weak sales are leading to job losses as major manufacturers cut production and shut factories temporarily.

Sluggish consumer demand and tardy investment led to a slowdown in demand for bank loans. Overall credit growth slowed to 12% in June from 12.7% in May, and is down from 14.2% at the beginning of April, according to central bank data.

The Ci ti India Financial Conditions Index, a liquidity indicator, showed overall conditions were improving in June after remaining fairly tight in April and May.

Industrial Activity

Growth in India’s core infrastructure sector, which constitutes 40% of total industrial production, eased to 5.1% in May from 6.3% in April.

Industrial output growth eased to 3.1% in May from 4.3% in April, with production of consumer durables and capital goods both weighing down activity. Both the numbers are reported with a one month lag.