The Indian economy has every reason to be confident in an otherwise gloomy world. Fiscal prudence shown by the central government, in the announcements made in union budget 2023, is an important step to lay the foundation for productivity lead growth. States need to find a balance between welfare schemes and ballooning debt. Any spending by those in power, that is not backed by asset creation, is going to ruin India’s party at the global stage.
The character of Indian financial markets has been tested by foreign entities that may have ulterior motives. Tech giants across the world have been laying off employees since the end of last year, and finally their offices in India witnessed uncomfortable goodbyes. Losing a job is not easy for anyone. The churn in the job market is the new normal.
In the following paragraphs, let us try to understand the state of the Indian economy (IndEcon) with help of data released by government agencies, industry associations, and financial analytics firms.
Goods and Services Tax
In the month of January 2023, the total gross GST revenue collected was ₹1,55,922 crore. The income in the current fiscal year up to January 2023 is 24% greater than the collections from GST in the same period last year. The revenue from domestic transactions (including the import of services) is up 22%, while the revenue from imports of products is up 29% compared to the same period last year.
The GST revenue has surpassed ₹1.50 lakh crore for the third time in the current fiscal year. Next only to the collection reported in April 2022, the GST collection in January 2023 is the second-highest.
Auto Sales
Although overall retail in January 2023 increased by 14% YoY, it nevertheless decreased by 8% from the pre-covid month of January 2020. The 2-Wheeler, 3-Wheeler, passenger vehicle, tractor, and commercial vehicle categories all saw growth on a year-over-year basis of 10%, 59%, 22%, 8%, and 16%, respectively.
The 2-Wheeler category, registered a 10% YoY gain, however when compared to 2021 and the pre-covid month of January 2020, the same declined by 7% and 13%, respectively.
The 3-Wheeler sector has grown by 60% year over year, by 101% when compared to 2021, and is currently just 3% lower than pre-pandemic levels in January 2020.
Manufacturing and Services
The Indian manufacturing sector has significantly improved over the past year. Total sales and output increased more slowly, although growth rates remained historically high. The rate of growth in new export orders was the slowest in ten months and was just marginal. Businesses attempted to increase their input inventories by acquiring more materials. According to the most recent data, domestic demand was the main driver of new business growth in January, with overseas sales just slightly increasing.
In January, Indian service companies experienced a significant uptick in new business, which supported additional output growth. While slowing from December, expansion rates were above average historically. Both input costs and output charges increased more slowly in terms of prices.
According to underlying data, domestic demand accounted for the majority of the increase in total new business, while orders from outside shrank. The decline was very slight when compared to December, which had the greatest upturn in nearly three and a half years.
Inflation
Retail inflation figures for the month of January 2023 were outside the comfort zone of the Reserve Bank of India (RBI). It rose to a three-month high of 6.52% while food inflation at 5.94% has policy makers worried. The RBI is left with no choice but to increase policy rates in the next meeting of the monetary policy committee.
Several monitored items registered high single-digit increase as compared to prices from the same period last year. Household expenses rose sharply on account of high prices of cereals (16.12%), spices (21.09%) and milk products (8.79%). Reduction in prices of vegetables (-11.70%) gave some relief, while clothing (8.83%) and footwear (10.52%) continued their sustained increase in prices over the last 12 months.
Confident India
Bulk of the growth in India’s GDP and workforce productivity is coming from domestic consumption. The aspirations of a billion-plus people is propelling the economy forward. This is not the time to be complacent, and at the same time we should not live in denial about the India growth story.
This time round, the Indian economy is spending to build world-class infrastructure and skill development programs. The entrepreneurial spirit of India has been awakened by the self-belief of common people. Given the current series of events, India and Indians have every reason to be confident about a prosperous and powerful future.