Tuesday, August 28, 2018

Sky high? Air traffic is not a leading indicator

Ever since the Central Statistical Office (CSO) published its new GDP series in January 2015, there has been scepticism from different quarters if this reflects realities on the ground. The sudden, sharp acceleration in GDP growth, pumped up by robust consumption stories, failed to convince many critics, including this writer. In the past, we have questioned the claims in support of a sustained economic recovery, citing dismal trends of many leading indicators, such as decelerating credit growth, low capacity utilisation, subdued IIP, export growth, etc. A few of these indicators have begun to show some positive movement in the last two quarters, but it’s still not clear if such trends will sustain given the emerging macroeconomic headwinds!
However, during this entire period, one sector stood out—air traffic growth, which has been consistently growing above 15%, quarter after quarter. Supporters of the recovery story have often flagged this as one of the most convincing lead indicators displaying strong consumption demand, particularly in the urban segment. Many, including this writer, questioned any such claims; it was pointed out that the aviation sector benefitted from sharp reductions in turbine fuel (ATF) costs and passed on the gains to attract prime customers away from railways, whose annual growth slowed in equal measure (see graphic).
28/08/18 Renu Kohli/Financial Express

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