GST collection, an indicator of consumption in the economy, has remained healthy except for a temporary blip in June, while IIP jumped 45% in the April-June period
New Delhi: The Gross Domestic Product (GDP) numbers, expected later today, will signal the trajectory of India’s economic recovery as the country comes out of the second wave of the coronavirus pandemic. Would it be encouraging?
The Reserve Bank of India (RBI) had on 6 August said quoting high-frequency indicators that consumption--both private and government, investment and external demand-- were all on the path of regaining traction. The central bank projected a GDP growth of 21.4% in the June quarter and a 9.5% growth for the full fiscal. In an analysis earlier this month, rating agency ICRA Ltd. had forecast a 20% expansion in the June quarter on the basis of healthy capital spending by central and state government, robust merchandise exports and resilient demand from the farm sector. However, this has to be seen in the context of the base effect due to a 24.4% contraction seen in the June quarter a year ago as a result of the full national lockdown meant to control the first wave of the pandemic.
Goods and Services Tax (GST) collection, an indicator of consumption in the economy, has remained healthy except for a temporary blip in June which represented sales achieved by businesses in May when parts of the country were under regional mobility restrictions. GST receipts of central and state governments have in July recovered to ₹1.16 trillion, suggesting recovery of economic activity in June.
Industrial output has jumped 45% in the April-June period of this fiscal, although on a low base of a 35.6% contraction in the same period a year ago.
Index of industrial production (IIP) data showed that mining, manufacturing and electricity generation have all expanded in double digits in the June quarter. Capital goods output has shown 110% growth while consumer durables have shown 132.6% in the June quarter compared to the year ago period when the full national lockdown had pushed these into contraction.
According to an analysis shared by Kotak Securities Ltd. on Tuesday, the production-linked incentive scheme has the potential to increase the manufacturing share in gross value added if domestic value addition increases.
GDP data will also show how farm sector output, which was a silver lining last fiscal, has held up, though uncertainty around monsoon will be a factor that will decide on this sector’s growth and on rural economy in general in coming quarters.
According to RBI, agriculture and rural demand would continue to support private consumption. Urban demand is likely to accelerate with recovery in manufacturing and non-contact intensive services, release of pent-up demand and the pace of vaccination.
The GDP figures will also indicate how public spending has been in the first quarter at a time frontloading of the intended full-year spending and some expenditure re-prioritisation has been a focus area for the central government.
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