India July data shows strong growth, but govt still doing the heavy lifting
India July data shows strong growth, but govt still doing the heavy lifting
The July data suggest that government capex is still doing most of the heavy lifting while domestic consumption and exports are sulking, but direct tax collections are good, indicating some quarters are making money
The first batch of data for the month of July, which flowed in on August 1, points to still strong economic growth, but with some caveats. Here’s a round-up.
1) The core sector data for June was the most heartening with the eight infrastructure industries’ growth showing a growth of 8.2 percent over the year-ago June when the same sectors grew 13.1 percent, albeit over a pathetic base in 2021.
2) Among the eight core sectors, steel growing at 21.9 percent, cement at 9.4 percent and coal at 9.8 percent is particularly impressive. Refinery products and electricity were unimpressive
3) That the infra sectors like steel and cement did well isn’t surprising if one looks at the fiscal data for June. Central government capex has shot up 63 percent in June to Rs 1.01 lakh crore; even if one took April-May-June, central government capex is up a whopping 59 percent at Rs 2.78 lakh crore.
4) The April-June gross tax collection growth at 11.1 percent seems to be just in step with nominal GDP growth. This appears to be mainly because of GST. The June GST collections which get reported in late July/early August, have grown by 11 percent to Rs 1.65 lakh crore.
5) But direct taxes appear much stronger. The provisional figures up to July 9 show that Direct Tax collections are up 14.7 percent to Rs 5.17 lakh crore over the corresponding period of last year, which is much stronger than nominal GDP. Direct Tax collection, net of refunds, stands at Rs 4.75 lakh crore, which is 15.87 percent higher than the net collections for the corresponding period last year.
6) Finally, July auto sales were a mixed bag, and more unimpressive than impressive. Starting with the largest: Maruti’s total sales were up only 3.2 percent and seriously undershot expectation of a 6 percent rise. Domestic sales grew only 2.5 percent. In two-wheelers, Bajaj did worse. Its total sales were down 10 percent YoY, while only domestic sales were down 2 percent. If one only looked at two-wheeler sales, that was down 15 percent! (What’s happening?) Among others, M&M did well with an 18 percent growth in car sales and an 8 percent rise in tractor sales. Tata Motors saw a 1.4 percent fall in total July sales, though domestic sales were flat from year ago levels. Eicher’s CV sales were also down 1.8 percent versus estimates of a small growth, but Ashok Leyland posted a strong 13.6percent growth in CV sales (clearly a beneficiary of good infra growth)
6) Finally, the July manufacturing Purchasing Managers’ Index or (PMI) came in at 57.7 in line with 57.8 in June. Companies noted a marked expansion of new orders in the sector, the S&P report said. But economists downplay PMI data as it covers a very small list of companies and isn’t very representative.
All told the July data suggest that government capex is still doing most of the heavy lifting while domestic consumption and exports are sulking. But direct tax collections are good, indicating some quarters are making money. Also, handsome taxes mean the government can continue with capex, hopefully, even if and when it leans towards populist income transfers ahead of elections.
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