State of the Economy. What does the slower GST growth rate mean for India’s economic health?

In this State of the Economy podcast, businessline’s Shishir Sinha and Achala Jethmalani, Economist, RBL Bank, discuss various high-frequency economic indicators and their implications on the macro economy. The conversation covers several key areas including GST collections, PMI manufacturing, employment trends, wholesale price index, fiscal deficit, and retail inflation. 

Jethmalani mentions that while the growth rate for GST collections has slowed to 7.7 per cent, the absolute numbers remain strong at 1.7 lakh crore. She attributes this to possible election-related activity slowdown.  The PMI manufacturing index shows positive signs with a reading close to 60. She highlights that India tops the chart among 10-12 countries and mentions that new orders and export orders are picking up, suggesting a positive outlook for the coming months. 

Employment indicators show mixed results. The Mahatma Gandhi National Rural Employment Guarantee Act (MNREGA) employment numbers have significantly dropped, while the Centre for Monitoring Indian Economy (CMIE) unemployment rate has increased to 9.2 per cent. Jethmalani points out the challenge of distinguishing between seasonal and permanent employment to understand the true employment trend. 

She also notes that producer inflation has increased due to rising input costs, which have been passed on to consumers. This is reflected in the WPI, driven by global commodity price spikes. However, she believes this may be a transient phenomenon if China’s economic slowdown persists. The fiscal deficit for the first two months has reduced to 3 per cent of the budget estimate, marking a monthly surplus for the first time in 22 months. Jethmalani attributes this to robust tax collections and reduced spending during the election phase. She expects the fiscal consolidation to continue with a fiscal deficit of around 18 lakh crore and capital expenditure remaining at 11 lakh crore. 

Retail inflation, particularly food inflation, remains a concern. She expects the retail inflation number for June to be similar to May’s 4.75 per cent, driven by high vegetable inflation. She predicts inflation to stay around 4.6 per cent in June, with core inflation reducing but not reaching the medium-term target of 4 per cent until at least September.

(Host: Shishir Sinha, Producer: Anjana PV)

 About the State of the Economy podcast

India’s economy has been hailed as a bright spot amid the general gloom that seems to have enveloped the rest of the world. But several sectors continue to stutter even as others seem set to fire on all cylinders. To help you make sense of the bundle of contradictions that the country is, businessline brings you podcasts with experts ranging from finance and marketing to technology and start-ups.