India’s Economic Landscape Unveiled: The Value of Satellite Data (SNN#22)

From the bustling metropolises to the remote rural areas, India’s economy is a complex web of diverse industries and activities. But how can policymakers and businesses gain a comprehensive and timely understanding of this vast landscape? The answer may lie in an unexpected source – satellite activity data. In this newsletter article, we explore the value of using satellite imagery to track India’s economic growth, identify emerging trends, and inform strategic decisions. 

The Indian economy has been performing relatively well in recent years, surpassing China to become the world’s fastest-growing major economy. However, the IMF downgrading its outlook on India for 2023, due to weakening domestic consumption and data revisions, is a clear indication of the challenges facing the nation. A similar number is expected for 2024. India is also affected by an ongoing global economic slowdown and tight monetary conditions. The country’s inflation, despite being lower than in many developed economies, is still well above the typical 2% target, with 5.7 % year-on-year being the latest number.

Changing global dynamics and the increasing trend toward protectionism and automation make it imperative for India to shift its growth model toward the service sector. The IT sector, in particular, has been a major driver of economic growth in recent years and is likely to continue to play a significant role in the country’s development.

The recent troubles faced by the Adani group are a cause for concern, as the firm is a major player in India’s infrastructure and green energy sectors. The allegations of stock manipulation and accounting fraud could have serious implications for the company and the wider economy. However, the rebound in the company’s share prices suggests that investors remain optimistic about its prospects.

Overall, while the Indian economy faces several challenges, it also has significant potential for growth in the years ahead. The government’s focus on reforms and improvements in the ease of doing business is a step in the right direction, but more needs to be done to address structural issues and promote sustainable and inclusive growth.

Figure 1: 90 days moving-average of Retail Market Index against Consumer Spending (INR Billion), (Spaceknow, TradingEconomics)

Spaceknow produces several indices monitoring various macroeconomic aspects of the Indian economy. Figure 1 shows the Spaceknow Retail Market index that captures activity at parking areas for customers who come to shop in traditional and often crowded street markets. We compare our index with Indian overall consumer spending and find a solid match especially given that our benchmark includes all other forms of retail and is not adjusted for inflation. With the indices monitoring more conventional shopping centers and parking places near key metro stations, we can provide a full picture of India’s retail activity.

Figure 2 shows Spaceknow’s aggregate manufacturing index and Indian Industrial Production as index adjusted for price inflation. We can see that the index strongly correlates with the Industrial output, predicting large fluctuations in Indian manufacturing output, including the vast COVID drop. The index is an example of Spaceknow products that combine several types of locations, such as transportation sectors like automotive, chemical, construction, distribution centers, and airports, to give an overall image of the economy.

Figure 2: 90 days moving average of Aggregate Manufacturing Index against Real Industry Production Excluding Construction in India (2015=100). The production numbers were deflated by a GDP deflator for India (Spaceknow, OECD) 

We continue to develop aggregated products for large sectors, such as Mining or Trade, using supervised learning algorithms. Figure 3 shows Spaceknow’s multi-input supervised index trained to predict a monthly and nominal version of India’s Industrial output seen above. The index was created by using several sectoral Spaceknow indices as inputs. Using sectoral Spaceknow indices, our model gives predictions that outperform the baseline scenario when we try to predict future values of the benchmark by using only past values of the benchmark itself.

Figure 3:  Monthly Industry Production Excluding Construction in India (2015=100) and Spaceknow Prediction using Aggregated Supervised Multi-index Model (Spaceknow, OECD) 

Above we have shown a small subset of our Indian Nowcasting Insights package that helps customers analyze and predict the development of the Indian economy. Spaceknow’s Indian package contains aggregate and supervised indices presented above but also covers many other sectors such as mining, steel manufacturing, the oil industry, various manufacturing, and airports.

In conclusion, India’s economy continues to be a key player in the global market, with diverse industries and a growing service sector. As our analysis has shown, satellite data provides a valuable tool for tracking the country’s growth, identifying trends, and informing strategic decisions. While the Indian economy faces challenges such as inflation and structural issues, there is significant potential for growth in the years ahead. The government’s focus on reforms and improvements in the ease of doing business is a positive step towards sustainable and inclusive growth. As we continue to monitor and analyze economic activity in India, we look forward to providing our customers with valuable insights and data-driven solutions to support their business goals.

Thank you for reading.

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