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  • Raghav Sand

IndEcon October 2021

Edward Tufte, Professor emeritus of political science, statistics, and computer science at Yale University has an interesting take on data. “If the statistics are boring, you’ve got the wrong numbers”, he said. Data is the most reliable indicator of progress. Future projections are made for different scenarios with varied degree of confidence. IndEcon (India plus economy) is a monthly feature, where it is our ‘Endeavour to Decipher’® key economic developments and statistics from the past month/quarter.

Consumer Price Index

“Inflation is taxation without legislation”. This Milton Friedman quote has stood the test of time. Friedman received the 1976 Nobel Memorial Prize in Economic Sciences for his research on consumption analysis, monetary history and theory, and the complexity of stabilization policy. Food items like cooking oil, fat and sugar registered price increase last month, while fruits, vegetables and egg got cheaper.

Data Source: MoSPI (GoI)

Fuel prices are marching upwards and a reversal is not happening anytime soon. Housing prices in the urban market seem to have stabilized after an uptick in the first half of the calendar year.

Foreign Portfolio Investment

September marked the comeback of the foreign portfolio investors (FPIs). Data shows that last month, FPIs made the largest purchase of stocks and debt instruments in 2021 so far at ₹27,756 crore. Nearly 30 per cent of FPI investments into stocks and debt instruments during 2021 so far came in September, data on the website of demat account provider NSDL shows.

Data Source: NSE Limited

Indian stock markets have gained nearly 50 per cent in terms of index value for Sensex and Nifty since the crash of March 2020. But contrary to the popular perception of the last two decades, the market rally in the past two years has been mainly driven by domestic inflows into stock markets led by retail and high net worth individuals.

Goods and Services Tax (GST)

The gross GST revenue collected in the month of September was ₹1,17,010 crore. It was 23% higher than the GST revenues in the same month last year. Revenues from import of goods was 30% higher and the revenues from domestic transaction (including import of services) were 20% higher than the revenues from these sources during the same month last year.

Data Source: GST Council

The average monthly gross GST collection for the second quarter of the current year has been ₹1.15 lakh crore, which is 5% higher than the average monthly collection of ₹1.10 lakh crore in the first quarter of the year. Coupled with economic growth, anti-evasion activities, especially action against fake billers, have also been contributing to the enhanced GST collections. Centre had also released GST compensation of ₹22,000 crore to States to meet their GST revenue gap.

Purchasing Manager Index (PMI)

Consumer goods was the brightest spot in September, posting the highest PMI reading of the three monitored market groups amid substantial accelerations in growth of new orders and output. Aggregate manufacturing production in India rose for the third straight month in September, and at a faster pace than that recorded in August. Improvement in sales has prompted firms to scale up production and purchase additional inputs.

Service companies have indicated that greater footfall boosted sales and output with some taking on additional staff to cope with rising workloads. As for prices, there was another increase in firms’ expenses. Selling prices rose again, although only marginally. Employment at the composite level stabilized in September, after contracting in each of the prior 18 months.

Employment Data

As per Centre for Monitoring Indian Economy, employment in September 2021 is estimated at 406.2 million (1 million = 10 Lakh). This is the highest in 20 months or since the Covid-19 shock in March 2020. It is, however, still lower than the pre-Covid employment of 408.9 million in 2019-20. It is also slightly lower than the September 2019 employment level of 406.7 million. The best part of the increase in employment last month was the increase in salaried jobs. These increased by 6.9 million from 77.1 million in August to 84.1 million.

India has entered the festive season and expectations are that the coming months could boost employment in general and in retail trade in particular. Given the large size of the retail trade industry an increase in employment in this can be expected to have a significant impact on overall employment.

As the rural regions added 6.5 million jobs in September it absorbed large numbers of the unemployed. As a result, the number of unemployed persons in rural India fell by 4.6 million from 22.7 million to 18.1 million. Besides, people also seem to have moved from the services sectors to the construction and manufacturing industries in rural India. Most of the new jobs created in rural India were of daily wage labourers.

IMF on the Indian Economy

“India came out of a very, very tough second wave, and that led to a big downgrade in July, but we have no change as of now. There are many challenges that the Indian economy already does face with regard to the financial market, with regard to the fact that the virus is not gone yet. India is doing well in terms of vaccination rates, and that is certainly helpful. Going forward over the medium term, it will be important to put in place a credible medium‑term strategy to bring down the debt‑to‑GDP ratio and create space to meet the future development needs and construction needs of the Indian economy.”

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