Farms to factories, India faces a drop in demand

Bloomberg

Consumption was India’s big story. Its 1.3 billion population was expected to guzzle everything from iron to iPhones, driving global growth and cheering investors such as Apple Inc. and Goldman Sachs Group Inc.
For a while everything seemed smooth. Indians were the world’s most confident consumers and the $2 trillion economy was the fastest-growing big market. Then, last November, PM Narendra Modi voided 86 percent of currency in circulation, worsening a slowdown that had started earlier in the year. Climbing global oil prices and a tightening Federal Reserve could also complicate domestic policy making.
“There are a number of uncertainties which are clouding the short-term outlook of the Indian economy,” said Kaushik Das, Mumbai-based chief economist at Deutsche Bank AG. “Risk of policy error remains high.”
Indians fell off the top of Mastercard’s Asia Consumer Confidence Index in the first half of 2017, and a report from the nation’s central bank last week confirmed the bleak outlook. About 27 percent of Indians surveyed said incomes have fallen, pushing overall sentiment into the “pessimistic zone”. Employment “has been the biggest cause of worry,” the Reserve Bank of India said.
Convincing Indians to consume would first require assuring them they’ll have a job. It won’t be easy for Modi to do so. Manufacturing jobs are forecast to fall about 30 percent this year and broader surveys show the hiring outlook is near a 12-year low.
The jobs scenario is gloomy because companies—bogged down by bad debt and poor demand—aren’t building more factories. Projects worth $7.8 billion were completed between July to September, the lowest since Modi came to power in 2014, according to data from the Mumbai-based information company Centre for Monitoring Indian Economy.