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  • Raghav Sand

Indian Economy (IndEcon) May 2022

Wars do not spare anyone. Geo-political tensions are adding fuel to the us versus them debate. Prices of essential commodities like food and fuel are rising each day, and governments across the world seem clueless. There is no single statistic or metric that is capable to present the true state of the Indian economy. On one hand, the central and state governments are using buoyant tax collections as a self-promotion tool, while on the other hand, they have chosen to deliberately overlook important issues.

Indian Economy: Mixed Signals

Managing inflation has become the number one priority of the Reserve Bank of India (RBI). Excess liquidity is being withdrawn through monetary policy measures. The central government has not been held accountable by an extremely disoriented opposition. We cannot deny the external pressures on India’s fiscal arithmetic, but the executive branch of the central government has fallen way short of expectations in managing the Indian economy. The benchmark index of the stock market is in correction mode, while consumption-based indirect tax collections are up. Every single metric is telling a different story. Let us Endeavour to Decipher® some key economic data from the past month.

GST Collection April 2022

The Goods and Services Tax (GST) collection is one of the few economic indicators which has risen consistently over the past year. The gross GST revenue collected in the month of April, 2022 was ₹1,67,540 crore. It is an all-time high figure by a margin of more than ₹25,000 crore. The revenues for the month of April 2022 are 20% higher than the GST revenues in the same month last year.

Indian Economy : GST Collection

For the first time, gross GST collection has crossed ₹1.5 lakh crore mark. Month of April 2022 saw the highest ever tax collection in a single day on 20th April 2022 and highest collection during an hour between 4 and 5 PM on that day.

Automobile Sales

A fair comparison of automobile sales in the month of April 2022 will be with April 2019, which was a normal pre-Covid-19 month. As per data released by the Federation of Automobile Dealers Associations (FADA), passenger vehicle and tractor sales grew by 12% and 30% respectively. Two-wheelers, three-wheelers and commercial vehicle are yet to turn green, as these categories were down by -11%, -13% and -0.5% respectively.

With Russia – Ukraine war continuing and China under lockdown, the global auto industry continues to suffer from supply crunch. Semi-conductor shortage along with high metal prices and container shortage prevails. Rural distress, multiple price hikes and high fuel prices are keeping price sensitive entry level two-wheeler customers away.

Indian Economy: Inflation Nation

The Monetary Policy Committee (MPC) of the RBI copy-pasted the response of their counterparts from developed economies on the subject of inflation. By terming inflation as transitory, the RBI fell behind the curve. In the first week of May, the MPC decided to raise key policy rates in an unscheduled meeting. This drastic step took everyone by surprise, and it has done more harm than good to the finances of the investors and general public.

Indian Economy: Inflation April 2022
Data: MoSPI, Govt. of India

Food inflation, especially in the rural areas, has breached the tolerance limit. It is reasonable to expect more rate hikes from the RBI in the coming months. As always, the banker’s banker has to make sure it does not suffocate the growth of the Indian economy. As per the data released for April 2022, prices of oils & fats, vegetables, spices, clothing & footwear, and fuel & light have registered double-digit inflation when compared to corresponding prices of April 2021. And, by the time inflation cools down, it will deliver a knockout punch to every citizens’ disposable income and savings.

Indian Stock Market

Equity markets are witnessing heightened volatility in the past few months. The current market sentiment is bearish due to several factors. Government securities’ yields are at record highs. Foreign Portfolio Investors (FPI) have been net sellers since October 2021; the FPIs have a negative net investment of ₹1,65,683 crore in equity segment for the said period. As a result, the wealth of domestic investors has eroded substantially in the past half year.

Indian Economy: FPI and NIFTY50
Data: NSDL and NSE Limited

Simple Things

The level of confidence statisticians show with approximations is baffling. If they really know so much about the economy, why are there no billionaire economists? It is fairly easy to analyse an event which has already occurred, while even after years of practice, it is difficult to predict the future. Economists and central bankers rely heavily on the trial-and-error approach. Until they get it right, common folks are taken on a roller-coaster ride. For a change, why not try to do the simple things right for a while, rather than failing at extravagant pursuits!

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