Indian Economy Overview: July 2022

Just like the pieces of a jigsaw puzzle, variables such as tax collections, inflation, employment data, consumer spending etc., help to gauge the health of economy. Capitalism pinches the have-nots more than the haves. In the past few weeks, central bankers across the world have increased key policy rates to check inflation. 

If we were to gauge the health of the Indian economy through the lens of tax collections, there is little scope for finding a fault. Factor in the rise in consumer price index (CPI), more commonly known as inflation, and you will get a more realistic picture about the current state of affairs. Data helps to tell stories with persuasion. Excess liquidity in the economy is being withdrawn through monetary policy measures.

GST Collection July 2022

The gross GST revenue collected in the month of July 2022 was ₹1,48,995 crore. This is the second highest revenue since the introduction of GST. The revenues for the month of July 2022 are 28% higher than the GST revenues in the same month last year of ₹1,16,393 crore.

For five months in a row now, the monthly GST revenues have been more than ₹1.4 lakh crore, showing a steady increase every month. The growth in GST revenue till July 2022 over the same period last year is 35% and displays a very high buoyancy.

Inflation Nation

The Monetary Policy Committee (MPC) of the Reserve Bank of India (RBI) will not stop increasing rates until it brings inflation under control. Consumer Price Index (CPI) climbed down in the month of July but it is still above the upper tolerance limit set by the RBI. Vegetables, spices, footwear, and fuel have registered double-digit inflation over the past twelve months.

As per internal deliberations of the RBI, inflation is set to remain above the six percent mark till the end of the calendar year. Government has a surplus stock of food grains, and must use it judiciously in the coming months.

Automobile Sales

Auto sales for the month of July fell by -8%. July is generally considered as a lean month before festival season commences in August. When compared with July 2019, a pre-covid month, total vehicle retails fell by -20%. Passenger Vehicles (PV) and tractor continued to outperform by growing 19% and 7%, respectively. All the other categories were in red with 2-wheeler, 3-wheeler and Commercial Vehicle (CV) falling by -28%, -15% and -4% respectively.

2-wheeler sales in rural India continue to underperform. CV retail figures continue to witness good demand as the Government's infrastructure push is helping customers in concluding their purchase. Apart from this, the Bus segment also witnessed the beginning of demand recovery as educational institutions and offices are once again back to normal mode. The PV segment is witnessing a dream run as retail sales are already higher than 2019.

Indian Stock Market

Equity markets have registered healthy gains in the past couple of months. After months of withdrawals the FPI data was back in the green. Domestic investors, both retail and institutional, are consistently ploughing money in the securities market. 

Manufacturing and Services

Indian manufacturers made a positive start to the second fiscal quarter, with marked gains in growth of new business and output. While companies stepped up input purchasing, job creation remained marginal amid an uncertain outlook and a general lack of pressure on operating capacities. There was also good news on the price front, as rates of both input cost and output charge inflation subsided.

The recovery of the Indian service sector lost momentum during July as weaker sales growth and inflationary pressures restricted the latest upturn in business activity. While marketing efforts underpinned another rise in new work intakes, competitive pressures and unfavourable weather dampened demand. That said, the weaker recovery was supplemented by retreating price pressures.

Simple Things

Markets have always adapted to external developments. The winter of 2022 may bring plenty of surprises for the world economy. It is fairly easy to analyse an event which has already occurred, while even after years of practice, it is difficult to predict the future. Economists and central bankers rely heavily on the trial-and-error approach.

This article was originally published on the The Know-How Journal. Content has been republished with consent.