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India’s finance ministry is upbeat on the Indian economy’s performance this fiscal (FY 24). In its latest monthly economic review, the finance ministry said that the country would register a strong growth and enjoy macro-economic stability this fiscal.

The review, however, pointed to inflation and the impact of external factors as possible risks to economic growth.

A further transmission of monetary policy could cause a tempering in domestic demand, the review said. Another point the FinMin noted in its October review relates to the Indian Rupee which has depreciated 1.81 per cent against the US Dollar in the last 12-months—this has, consequently, made foreign currency borrowings and imports more expensive.

However, the government’s policy measures and transmission of monetary policy tightening has helped in combating inflation, the review said.

Healthy tax collections this year has created more fiscal space for spending and with tax collection robust, government revenues are expected to substantially exceed budgeted estimates amid increased economic activity.

“On balance, however, India’s growth experience in FY 24 will continue to be a positive outlier as compared to other major economies,” the review said.

GST Collection Up Sharply at Rs 1.72-lakh-cr

The Goods and Services Tax (GST) collection in October this year moved steeply northward to Rs 1.72-lakh-crore, a 13.4 per cent increase Year-on Year (YoY). This is the second-highest mop-up since the introduction of the GST regime in July 2017.

The collections have averaged Rs 1.66-lakh-crore per month (April-to-October this year), a 11.4 per cent increase from the monthly average of Rs 1.49-lakh-crore during the same year-ago period.

A boost in consumption and economic activity along with settlement of disputes supported by healthy sales during the festival season which began in August have all likely contributed to the high GST revenue collection.

An important point here is the recent spate of notices sent by the GST authorities for recovery of unpaid taxes or under-payment or wrongful availing of input tax credit and such like. Many businesses would likely have made payments to settle disputes and all these factors would have had a positive impact on the GST revenue.

With domestic consumption likely to receive a big boost during the Diwali festival season, GST revenue could further increase in the coming months.

Experts aver that at the present GST revenue growth rate, Central GST collections are expected to slightly overshoot the budgetary target for this fiscal (FY 24).

Two States Clock Negative GST Growth in Oct

While several states and union territories have registered a growth in excess of ten per cent, two states have seen a decline in GST revenue collections in October this year.

The two states are Himachal Pradesh (HP) and the north-eastern state of Manipur. The latter witnessed a double-digit decline—at 19 per cent, mainly due to the violence that rocked the state a few months ago.

Himachal Pradesh recorded a two per cent decline primarily because of floods and landslides which hit the mountainous state recently.

Business activities in both the states were, therefore, severely affected.

Four states with the highest State GST (SGST) share—Maharashtra, Karnataka, Uttar Pradesh and Tamil Nadu registered heartening growths of 14 per cent,12 per cent, 10 per cent and nine per cent, respectively, in October.

Central GST (CGST) in October came in at Rs 30,062-crore, SGST at Rs 38,171-crore, Integrated GST (IGST) at Rs 91,315-crore while cess stood at Rs 12,456-crore. IGST includes Rs 42,127-crore collected on import of goods while cess includes Rs 1,294-crore, also collected on import of goods.

CGST collections, after settlement of share from IGST stood at Rs 4.87-lakh-crore during the April-to-October period. A significant point to be highlighted here is that this is 60 per cent of the budget target for CGST of Rs 8.12-lakh-crore.

Q2 FY 24 GDP Growth Likely at Around 7 pc

India is well-placed to register a heartening GDP growth of between 6.9 per cent-to 7.1 per cent in the second-quarter of this fiscal (Q2 FY 24). This performance is likely to be driven by a robust showing and sustained buoyancy in both the agriculture and services sectors, SBI Ecowrap noted.

In Q1 of this fiscal, the country registered a noteworthy 7.8 per cent GDP growth, outpacing many major economies.

“Domestic economic activity in Q2 has been supported by robust agriculture performance, sustained buoyancy in services, strong capital expenditure by the Centre (49 per cent of budgeted) and states (32 per cent of budgeted) and a robust pick-up in consumption expenditure,” the report said.

India Inc also performed encouragingly with its top-line expanding four per cent in the second-quarter of this fiscal. EBIDTA and Profit After Tax (PAT) also climbed northward by a healthy 66 per cent and 31 per cent, respectively, as compared to the second-quarter of last fiscal (Q2 FY 23).

The economic momentum was provided by critical sectors such as banking, auto, capital goods, cement, electronics, power generation, realty and FMCG, among others.

SBI Ecowrap said that this growth indicated that corporate results have been strong across the universe and were largely broad-based.

Steep Climb in India’s Forex Reserves

India’s foreign exchange reserves climbed steeply to a 11-week high of USD 595-billion as of November 17, data from the Reserve Bank of India (RBI) showed.

The foreign exchange reserves also include the country’s reserve tranche position in the International Monetary Fund (IMF).

The reserves expanded by USD 5.1-billion which is the biggest gain in four-months.

Changes in foreign currency assets are caused by the Reserve Bank’s intervention as well as the appreciation or depreciation of foreign assets held in the reserves.

OPEC Gains, Russia Slides in India Oil Market

The Organisation of Petroleum Exporting Countries (OPEC)’s share in India’s oil imports registered a 10-month high in October as more crude was purchased from both the United Arab Emirates (UAE) and Saudi Arabia.

Russia’s share of the Indian oil market last month slid to its lowest in nine-months, a news report said.

The decline in Russia’s share in the Indian oil market follows a narrowing of discounts for its oil and, therefore, refiners have increased imports from OPEC, especially Saudi Arabia and the UAE.

India became a very big buyer of Russian oil after several European countries ceased purchasing Russian oil following the Russia-Ukraine war.

Imports from Saudi Arabia and the UAE rose to a seven-month high of about 53 per cent and 63 per cent, respectively, in October this year as compared to the previous month of September. This lifted the share of producers in OPEC to 54 per cent in October from the 50 per cent in September.

India imported on average 1.56-million barrels per day (bpd) of Russian oil in October, up 1.2 per cent from September. However, despite this increase, Russia’s oil share in India’s October imports slid to 33 per cent in the month, down from the 35 per cent in September.

In the first seven-months of FY 24, Russia was the top oil supplier to India, the second and third spots occupied by Iraq and Saudi Arabia, respectively.

India’s Oct Retail Inflation Hits a 5-month Low

On the back of a southward movement in prices of some items and a favourable base effect, India’s retail inflation or Consumer Price Index (CPI) inflation declined from 5.02 per cent in September this year to 4.87 per cent in October, according to data from the Ministry of Statistics and Programme Implementation (MoSPI).

A point to be highlighted here is that for the second month in a row, the retail inflation number has come-in within the Reserve Bank of India’s tolerance range of 2-to-6 per cent.

The Consumer Food Price Index increased by 1.1 per cent from September this year.

Among food items, vegetables’ index increased 3.4 per cent Month-on-Month (MoM), primarily driven by a 15 per cent sequential rise in onion prices. However, importantly, potato prices remained unchanged in October while tomato prices slid by a significant 19 per cent MoM.

Prices of eggs, pulses and cereals rose on a MoM basis by 3.4 per cent, 2.5 per cent and 0.8 per cent, respectively.
Excluding food items, price momentum, however, was largely subdued and this helped reduce core inflation (inflation excluding food and fuel) to 4.2 per cent in October this year from 4.5 per cent in the previous month.

While inflation has slid below the five per cent mark in October, it is expected to move northward in November and December as the base effect will no longer continue to be favourable.

As per the Reserve Bank’s forecast, the CPI inflation is estimated to average 5.6 per cent in the October-to-December quarter of this fiscal.