The world is going through a peculiar phase. All the major economies in the world are facing high rates of inflation. Central bankers are hiking rates to absorb excess liquidity. Even after multiple rate hikes there is still some underlying inflation. Fuel prices have diverted funds away from several discretionary items and lack of confidence from the consumers has policymakers worried.
The Indian economy has been hailed as a bright spot in an otherwise gloomy world, but all is not well in India. India has weathered the economic disruption caused by external factors with resilience. A huge section of the employable population in India is witnessing extreme churn in their fields. The budget of 2023 must lay the roadmap for a more inclusive economy. In the near-term, the government has hit the political bull’s-eye by choosing to distribute surplus food grains for free, to more than 50 percent of the population. The benefits of such a move to build human capital shall bear fruit in the coming years and decades.
Good and Services Tax (GST)
The gross GST revenue collected during December 2022 was ₹1,49,507 crore. The revenues for the month of December 2022 were 15% higher than the GST revenues in the same month last year. During the month, revenues from import of goods were 8% higher and the revenues from domestic transactions (including import of services) were 18% higher than the revenues from these sources during the same month last year.
In 2022, the GST revenue for seven out of the twelve months were higher than the two-period moving average (shown with red line over the charts). April and October registered GST collections of over ₹1,50,000 crores and consistency in collections signaled some recovery in public and corporate spending. The GST council has been contemplating to further rationalize tax slabs, while the contentious issue of bringing petroleum products under the purview of GST keeps cropping up every now and then.
State of Manufacturing and Services
The S&P Global PMI® statistics showed that Indian manufacturers had a very good year in 2022, with business conditions improving to the highest level in more than two years. Although, less so than in November, the demand for Indian goods internationally also increased. As a whole, new orders from abroad increased at the slowest rate in five months, with numerous businesses finding it difficult to get new business in important export markets.
At the end of 2022, manufacturers increased production because the overall demand was still favourable for growth. Data from December indicated that producers of merchandise were increasing their purchasing levels.
The Indian service industry is doing well, according to data from December, with higher growth in new business driving up output growth. More jobs were created, and businesses were optimistic about the business activity in 2023. Due to a dramatic increase in business expenses, including higher costs for labour, food, energy, and transportation, service prices have also increased.
In December, Indian service companies saw a gain in new business for the seventeenth consecutive month. Additionally, the expansion rate was abrupt and the quickest since August. Growth has been attributed to strong demand and effective marketing campaigns.
Auto Sales
After two outstanding months, October and November, which saw an adrenaline surge throughout the whole auto industry, the month of December was comparatively subdued. In 2022, retail sales of passenger vehicles (PV) reached an all-time high. Apart from PV, the only other segment that has grown significantly from 2020 and 2021 levels is the tractor segment, which also saw new all-time record sales of 7.94 lakh units.
Inflation
The general increase in prices of goods and services is termed as inflation. To maintain optimum supply of money in the economy, the Reserve Bank of India (RBI) has been raising rates over the last 12 months. However, the inflation has not come down to desirable levels. The only positive has been a general fall in the prices of vegetables. Prices of milk and milk products have risen as a result of the rise in input costs.
Commodities like cereals, spices, footwear, and clothing have registered double-digit increase in prices when compared to prices from last year. As a result of increase in borrowing costs, EMIs have gone up and business investment has remained low-spirited.
High Hopes from General Budget 2023
The Government of India and the governments of all states are the biggest spenders in the economy. It is essential for those in power to formulate and execute policies that build assets for common good. Due to hyper digitisation in all the sectors of the economy, a large chunk of the employable population is looking for purposeful opportunities and an ecosystem that supports and upskills them. No one needs pity when it comes to work and money. For India to make the most of its demographic advantage, we need to think as a nation and move together towards tomorrow.