There is no single statistic or metric that is capable to project the state of the economy. Just like the pieces of a jigsaw puzzle, variables such as, tax collections, inflation, consumer spending etc., help to gauge the health of economy. In the past few months, inflation and supply chain strains have slowed down pace of economic recovery. Central banks across the world have hinted towards policy action much ahead of market expectations.
Goods and Services Tax
The gross GST revenue collected in the month of January 2022 was ₹1,40,986 crore. This is the highest monthly collection since the inception of GST. The revenues for the month of January 2022 are 15% higher than the GST revenues in the same month last year and 25% higher than the GST revenues in January 2020.
During January, revenues from import of goods was 26% higher and the revenues from domestic transaction (including import of services) was 12% higher than the revenues from these sources during the same month last year. This is the fourth time GST collection has crossed ₹1.30 lakh crore mark.
Automobile Sector
The month of January continues to show weak performance as overall retails on a year-on-year basis fell by -10.7%. Three wheelers and commercial vehicles (CV) have shown growth as compared to last year. The automobile sales are yet to scale the levels of early 2020. In spite of good demand, passenger vehicle continues to face the impact of semi-conductor shortage.
The Federation of Automobile Dealers Association feels that outlook for the auto sector is ‘negative – neutral’ to ‘neutral’ for the next couple of months. Union Budget 2022 stressed on developing 25,000 kms of new highways. This will further push infrastructure spending, thus resulting in an increase in CV sales.
Inflation
Oils and fats registered the sharpest increase when compared to prices from January 2021. An 18.7% inflation rate for items like cooking oil and clarified butter (Ghee) has adversely affected household budget for most and nutritional intake for others. Price rise was witnessed across all segments in the last twelve months.
Footwear prices are climbing higher every month and transport and communication costs show no signs of cooling down. Monetary policy action from Reserve Bank of India has been accommodative for a long time. Revival in economic activity is expected in the coming months.
External Trade Recovery
External trade recovered strongly in 2021-22 after the pandemic-induced slump of the previous year, with strong capital flows into Indian economy, leading to a rapid accumulation of foreign exchange reserves.
The Economic Survey 2021-22, tabled in Parliament by the union minister for Finance and Corporate affairs Smt. Nirmala Sitharaman says that the resilience of India’s external sector during the current year promises well for growth revival in the economy. It however cautions that the downside risks of global liquidity tightening and continued volatility of global commodity prices, high freight costs, coupled with the fresh resurgence of COVID-19 with the new variants may pose a challenge for India during 2022-23.
Agriculture
The agriculture sector which accounts for 18.8 per cent of Gross Value Added (GVA) of the country in 2021-22 has experienced buoyant growth in the past 2 years. It grew at 3.9 per cent in 2021-22 and 3.6 per cent in 2020-21 showing resilience in the face of COVID-19 shock.
India is the second largest producer of sugar in the world. India has become a “sugar surplus nation”. This has been made possible by insuring and protecting the sugarcane farmers against price risk through Fair and Remunerative Price (FRP), enhancing the liquidity of mills by incentivizing them to divert excess sugarcane/sugar to ethanol production and provide financial assistance for transport to sugar mills to facilitate export of sugar.
Budget 2022 (Separate article; opens in new tab)
Extra Chart
