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  • Raghav Sand

IndEcon May 2021

“In God we trust. All others must bring data.” This quote, made by W. Edwards Deming, refers mainly to the importance of data measurement and analysis when doing business. In an economy, every activity is quantified, tabulated and compared. The clouds of uncertainty are hovering over the economy and people are more concerned about the short term. Estimates and projections based on various scenarios are being recalibrated on a daily basis. Economic activity was getting back on its feet in the first three months of calendar year, but the second wave of Covid-19 submerged the fragile sand castles built from the rubble of first wave.


Life goes on, and wherever there is money being spent, it is accounted for in one way or the other. People are glad to make ends meet, but in all the doom and gloom there is always some activity that leads us to hope against hope. Just like the disclaimer of mutual fund schemes, “past performance is no guarantee of future results”, a lot can change over the month of May. In this monthly article, we will try to decipher key data about the Indian Economy (IndEcon) from April 2021.


Bumper GST Collection


The gross GST revenue collected in the month of April 2021 was at a record high of ₹1,41,384 crore of which CGST was ₹27,837 crore, SGST was ₹35,621, IGST was ₹68,481 crore (including ₹29,599 crore collected on import of goods) and Cess was ₹9,445 crore (including ₹981 crore collected on import of goods). The GST revenues during April 2021 are the highest since the introduction of GST even surpassing collections in the last month (March 2021). GST revenues have not only crossed the ₹1 lakh crore mark for the last seven months but have also shown a steady increase.


Source: Ministry of Finance (GoI)

Stock Market


Equity mutual funds (MFs) saw a net inflow of ₹3,437 crore in April, making it the second consecutive monthly infusion but lower than the amount recorded in March amid the second COVID-19 wave. The quantum is much lower than the inflow of ₹9,115 crore recorded in March, according to data from the Association of Mutual Funds in India. Equity schemes had witnessed outflows for eight straight months from July 2020 to February 2021.


“With the second wave putting pressure on citizens to hold a higher emergency corpus for medical needs, investor interest is a tad down and can be expected to recover in the waning phase of this health scare,” Gopal Kavalireddi, head of research at FYERS, said. Foreign Portfolio Investment turned negative for the first time this calendar year, with equity segment witnessing the sharpest reversal from the trend of last three months. The broader market held its nerve and the benchmark SENSEX shed close to 800 points in aggregate.

Source: BSE Limited

Jan Dhan Accounts


For the first time in the last eight months, total balance in Pradhan Mantri Jan Dhan Yojana (PMJDY) accounts has come down significantly in April. As per latest government data, total balance in Jan Dhan accounts decreased to ₹1,43,297 crore as on April 28, 2021 as against ₹1,46,084 crore in the beginning of the month, a drop of ₹2,787 crore.


The dip in Jan Dhan account balance also proves that the intended purpose of the scheme is being met as people now use the savings in their accounts in tough times, Prasanna Tantri, Executive Director, Center for Analytical Finance, Indian School of Business, said. “This also shows increasing financial literacy on the part of the account holders most of whom are poor,’’ he added pointing out that the impact of the second wave of the pandemic is still not as bad as it was during last year April-May, he said.


Automobile Sector is in the Slow Lane


Apart from Tractors, which witnessed a year-on-year increase in sales of 16.11 per cent, all other vehicle categories registered a dip. Two-wheeler and three-wheeler categories saw a drastic fall of 31.51 per cent and 64.12 per cent, respectively. Sale of commercial vehicles managed to somehow cross the halfway mark when compared to the previous financial year. The drop in annual vehicle sales is being attributed to muted economic activity and shaken consumer confidence.

Source: Federation of Automobile Dealers Associations of India

The second wave of Covid-19 has not only unsettled urban but also the rural markets this time round. The country’s weather office has said that India is expected to get average monsoon rains this year, thus raising expectations of higher farm output, which is central to the country’s economy. This will also lead to rural markets recovering faster than urban; categories like Tractors and 2-Wheelers will have a rub off effect.


Manufacturing and Services


Economic conditions in India’s manufacturing sector remained favourable in April, as companies scaled up production in line with a further improvement in demand. While output and sales increased at the slowest rates since last August due to an intensification of the COVID-19 crisis, there was a faster upturn in international orders.


Consumer goods was the strongest-performing category, followed by capital goods and then intermediate goods. Both new orders and output at Indian manufacturers expanded at marked rates that were nevertheless the slowest in eight months. Although manufacturing employment continued to fall, the rate of contraction recorded in April was marginal and the weakest in the current 13-month sequence of job shedding.

Chart Courtesy: IHS Markit

The Indian service sector remained resilient to the escalation of the COVID-19 crisis, with a further solid increase in new work supporting output expansion. Meanwhile, service providers noted the steepest rise in overall expenses since December 2011. Indian services firms were optimistic regarding the 12-month outlook for business activity, but the overall level of positive sentiment fell to the lowest since last October. Payroll numbers in the services sector fell for the fifth month in a row in April, albeit at a slight pace that was the weakest since January.


Bonus Chart – Inflation

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