NEW DELHI: Two sets of data released on Tuesday indicated India’s economy may be on the mend. For one, Goods and Services Tax (GST) revenue figures for November showed indirect tax collections crossed the psychological mark of Rs 1 lakh crore for the second month in a row, at Rs 1.04 lakh crore.
While this was slightly lower than the October mopup of Rs 1.05 lakh crore, it was 1.4% more than the GST revenue recorded in November 2019, as festive demand drove up sales and tax collections. Festive sales also saw the Nikkei Purchasing Managers’ Index (PMI) at 56.3 in November, a sign that companies were hoping for continued sales in December and were buying inputs in anticipation.
Though the PMI, compiled by IHS Markit, declined to 56.3 in November from October’s decadal high of 58.9, it still remained well above the 50-level separating growth from contraction. Officials said that of the total GST collection, central GST was Rs 19,189 crore, state GST Rs 25,540 crore, IGST Rs 51,992 crore (including Rs 22,078 crore collected on import of goods) and while Cess stood at Rs 8,242 crore (including Rs 809 crore collected on import of goods). The government has settled Rs 22,293 crore to CGST and Rs 16,286 crore to SGST from IGST as regular settlement.
Festive demand kickstarts economic recovery, but Covid damage severe
Thehe total revenue earned by the Centre and the state governments after regular settlement in November 2020 was Rs 41,482 crore in CGST and Rs 41,826 crore in SGST. Divakar Vijayasarathy, founder and managing partner of DVS Advisors LLP, said he expected GST collections to grow in December and January on the back of a festive push, but “the real challenge or indication of recovery would be sustaining the collections post festive season in the months of February and March”.
“The softening of rates of expansion seen in the latest month does not represent a major setback, since these are down from over decade highs in October.” said Pollyanna De Lima, economics associate director at IHS Markit, adding that “a spike in Covid-19 cases and the possibility of associated restrictions could undermine the recovery.” The Nikkei PMI report showed that new export orders increased markedly in November, with survey participants reporting strong demand from key export markets.
The pace of expansion, however, eased from October’s high levels. However, Darren Aw Asia Economist at Capital Economics pointed out that despite better data in November, “the damage already dealt to corporate balance sheets has been very severe and will take a long time to recover from. And the extreme weakness of India’s banking sector means that many firms will continue to be starved of finance, long after the virus is brought under control.”
Manufacturing output shows recovery
The Indian government’s latest GDP data, which supports the PMI indications, showed that manufacturing output during the second quarter (July-September) of the current fiscal year grew by just 0.6 per cent.
Strong pick-up in export orders
The Nikkei PMI report showed that new export orders increased markedly in November, with survey
participants reporting strong demand from keyexport markets