The week in charts: Exports fall, deposit surge, and the work hour debate

India’s exports continued to see persistent weakness in 2024, with the year ending in the red. (Image: Pixabay)
India’s exports continued to see persistent weakness in 2024, with the year ending in the red. (Image: Pixabay)

Summary

  • Every week, Plain Facts publishes a compilation of data-based insights, with easy-to-read charts to help you delve deeper into the stories reported by Mint in the week gone by.

India’s exports declined for the second consecutive month in December, while the government is likely to undershoot its fiscal deficit aim in 2024-25. The credit-deposit ratio softened in 2024 and the work-hour debate intensified after a new remark by Larsen & Toubro's chairman.

Export weakness

India’s exports continued to see persistent weakness in 2024, with the year ending in the red. Exports contracted 1% year-on-year in December albeit at a slower pace amid geopolitical risks. Exports did see sharp surge in growth in three months in 2024, moderate growth in another three months, while contraction in the rest of the month. While engineering goods and electronic goods recorded strong growth in December, petroleum and crude products proved to be a drag. Going ahead, a weaker rupee may provide a cushion to exports amid risks of a trade war. 

Also Read: India’s trade deficit declines to $21.94 bn in December

Mounting debt

Consumer spending remains weak in both rural and urban areas, with consumer-staple companies collectively reporting less than 5% volume growth, signaling a weak third quarter for the sector. Underlying the weak consumer sentiment is a sharp rise in household debt in recent years. From 77 trillion as of June 2021, household borrowings surged 56% to 120 trillion as of March 2024. Even relative to GDP, it increased from 36.6% to 41% of GDP. By June 2024, this further climbed to 42.9% of GDP, as per the Reserve Bank of India's December financial stability report. 

Also Read: Mint Primer: Why consumer demand needs a quick revival

Gliding path

4.7-4.8%: That’s the projected fiscal deficit of GDP for 2024-25, below the budgeted estimate of 4.9%, marking yet another step towards fiscal consolidation, Mint reported. This improvement stems from lower-than-planned capital expenditure and higher RBI dividends. A higher-than-estimated direct tax collections will also help. The government had committed a fiscal roadmap in FY22 , targeting a fiscal deficit below 4.5% of GDP by FY26. Since reaching 6.8% of GDP in FY22 (revised estimates), India's fiscal deficit has steadily declined, exceeding targets for the past two fiscal years. 

Also Read: Fiscal consolidation set on cruise control

Seasonal moderation

India's retail inflation eased to a four-month low of 5.22% in December, down from 5.48% in November and 5.69% last year, driven by slower increase in food prices. While December saw a seasonal decline in food inflation to 8.39% from 9.04% and 10.87% rise in the previous two months, concerns about future food price volatility still persists. While inflation is yet to sustainably move towards the medium-term aim of 4.0%, slower growth in the second quarter has raised expectations of a rate cut next month.

Also Read: India’s retail inflation moderates to four-month low of 5.22% in December driven by easing food prices

Collections bonanza

Driven by strong growth in personal and corporate income tax collections, the Central government's net direct tax revenue (after refunds) has reached 16.9 trillion so far this financial year, recording a growth of 15.9%. The Budget had only projected a growth of 12.8%. Corporate tax collections, net of refunds, grew 16.5% to 7.68 trillion. Tax on non-corporate entities, the bulk of which comes from personal income, grew 21.7% annually to 8.74 trillion. The robust growth, despite economic slowdown, highlights improved tax buoyancy.

Deposits takeover

2 trillion: That’s how much Indian banks’ deposits exceeded loans in 2024, leading to a softening of the credit-deposit ratio, though deposit growth still lagged growth in advances. The gap between new deposits and non-food credit widened to over 2 trillion, up from 1.3 trillion in 2023, excluding the impact of the merger of HDFC Ltd into HDFC Bank. A deposit crunch in 2024, caused by faster credit growth than deposit growth, troubled lenders. This situation eased as credit growth subsequently slowed, though credit again outpaced deposits in December.

Overtime clash

The debate on work-life balance reignited after L&T chairman suggested a 90-hour work week and his desire to make Sundays a work day. A Mint analysis of labour-related data shows Indians do work the longest hours globally, with 51% of the workforce logging over 49 hours weekly, the highest among 170 countries. The current Indian labour laws mandate that work hours should not exceed nine hours per day, including a rest period of half an hour for blue-collared workers. Employees are also entitled to at least one day of weekly off.

Chart of the week: Budget bug

Opinions are divided whether a budget can be populist against the backdrop of a slowdown in consumption in economy. According to a recent Mint survey, 41% supported a populist budget, 38% opposed it, and 21% remained undecided. High-income respondents showed a stronger opposition to a populist budget.

 

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