Moneycontrol's Advance Business Index Falls to 3-Month Low in April Amid Global Uncertainty

India's Economic Momentum Eases Amid Rising Global Uncertainty and Elevated Crude Oil Prices

India's economy continued to expand in April, but the momentum has moderated sharply from the February peak, according to the latest Advance Business Index (ABI) reading. The ABI fell to a three-month low of 100.8 in April from 102.5 in March, signaling an easing in economic momentum.

The ABI is a composite indicator based on 18 high-frequency economic indicators spanning consumption, mobility, financial activity, labor demand, and industrial output. A reading above 100 reflects above-trend growth, while a value below 100 indicates that economic activity is running below its long-term average. The April reading suggests that India's economy continues to expand, but the momentum has slowed.

The Impact of Elevated Crude Prices

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The sharp rise in crude prices is likely to be the most important macro risk visible in the April data. Crude prices remained above $100 per barrel for a second consecutive month, with the Indian crude basket rising to $114.48 per barrel in April from $113.49 per barrel in March. This has had a significant impact on the economy, with indicators such as diesel consumption growth slowing sharply to 0.9 percent in April from 8 percent in March, and coal production contracting 9.7 percent in April.

Broad-Based Slowdown

The slowdown was broad-based across several consumption and industrial indicators, although some pockets remained resilient. Four-wheeler sales, a proxy for urban consumption demand, slowed to 11.6 percent in April from 25.8 percent in March. Two-wheeler sales growth also slowed to 13 percent from 29.5 percent in the previous month.

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However, some indicators continued to provide support. PMI Manufacturing improved to 55.9 from 53.9 in March, while PMI Services edged up to 57.9 from 57.5. UPI volumes grew 24.9 percent, slightly faster than March, and non-food credit growth improved to 14.9 percent from 13.7 percent.

Two-Speed Economy

The data points to a two-speed economy, with financial activity, digital payments, and parts of the rural economy remaining supportive, while energy-linked sectors, urban consumption indicators, and job creation are showing signs of moderation. The key risk for the coming months will be whether elevated crude prices begin to feed more deeply into inflation, consumption, and industrial production. If energy prices remain high, the economy could move from above-trend expansion towards a phase of consolidation.