Recent data on the economy’s performance seem to indicate India’s growth story may be hitting the pause button. After an impressive show following the pandemic-period deceleration, a slowdown could now be on the cards. The GST collection for June 2024 was Rs 1.74 lakh crore, a 7.7 percent increase from a year ago. This growth was slower than the 12.4 and 10 percent rise recorded in April and May, respectively. When seen in absolute terms with the previous months, with collections of Rs 1.73 lakh crore in May and Rs 2.1 lakh crore in April, the revenue line for the April-June quarter seems flat. GST collections, which indicate the volume of goods and services sold, is a good indicator of the economy’s performance.
On a similar note, just-released data from the private Centre for Monitoring Indian Economy showed that the setting up of new projects such as factories and roads had fallen to Rs 60,000 crore in the April-June quarter. This is as much as 92 percent lower than the Rs 7.9 lakh crore logged for the same quarter a year ago, and is the lowest for new projects since 2009. Sale of passenger cars, another bell-weather indicator, has slowed. Car manufacturers sold 3.41 lakh units, an increase of just 12,000 units this June, compared to the same month last year. This was despite the discounts and freebies offered. For Tata Motors, sales actually fell 8 percent.
These could be short blips as industry is in a wait-and-watch mode before the budget. The first quarter of 2024-25 was a difficult period, with the searing heat increasing rural distress, which in turn took a toll on jobs and purchasing power. The poll-time model code slowed the government’s infrastructure work. The Red Sea blockade increased freight rates, making capital imports expensive. So, seeing the marginal increase in GST and car sales as indicators of robust growth would be a misread.
Among the major drags in recent years has been the abysmal growth in private investment. While the government has been pushing growth by pouring money into infrastructure projects, the private sector has not matched the effort. Part of the reason for its defensive stance is industry’s fear of committing funds in an ambivalent environment. The budget can be a good starting point to reverse these trends and stoke growth through consumer spending and higher project investment.