What does slow GST growth rate mean for India’s economic health?

In this context, the economy podcast, of business Shishir Sinha and Achala Jethmalani, Economist, RBL Bank, discuss various high-frequency economic indicators and their implications for the macro economy. The dialogue covered several key areas including GST collections, PMI production, employment trends, wholesale price index, fiscal deficit and retail inflation.

Jethmalani notes that while the GST collection growth rate has slowed to 7.7 per cent, the absolute numbers are at Rs 1.7 lakh crore. He attributes this to sluggish election-related activities. PMI manufacturing index close to 60 showing positive signs. He notes that India tops the rankings among 10-12 countries and that new orders and export orders are on the rise, 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 fallen significantly, while the Center for Monitoring the Indian Economy (CMIE) unemployment rate has increased to 9.2 percent. Jethmalani points out the challenge of distinguishing between seasonal and permanent employment to understand actual employment trends.

He also notes that as producer inflation has increased, input costs passed on to consumers have increased. This is reflected in the WPI driven by global commodity price hikes. However, he believes this could be a temporary phenomenon if China’s economic slowdown persists. The fiscal deficit for the first two months narrowed to 3 percent of the budget estimate, marking the first time in 22 months that a monthly surplus has been recorded. Jethmalani attributes this to strong tax collections and reduced spending during the election phase. He expects fiscal consolidation to continue with a fiscal deficit of around Rs 18 lakh crore and capital expenditure remaining at Rs 11 lakh crore.

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Retail inflation, especially food inflation, remains a concern. He expects June’s retail inflation to be similar to May’s 4.75 percent, driven by higher vegetable inflation. He forecast inflation at 4.6 percent in June, with core inflation easing but not reaching the medium-term target of 4 percent until at least September.

(Producer: Shishir Sinha, Producer: Anjana B.V)

About the economic situation

India’s economy has been hailed as a bright spot amid the general gloom surrounding the rest of the world. But many sectors continue to falter while others seem to be firing on some cylinders. To help you understand that country is a bundle of contradictions, Business Bringing you podcasts with experts ranging from finance and marketing to technology and start-ups.

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