India’s monthly goods and services tax (GST) collection hit the second highest ever in July while manufacturing activity bounced back to an eight-month high, indicating that economic recovery remained firm as interest rates inched up. Other high-frequency indicators such as fuel sales, power demand, railway freight, and car sales also indicated economic strength though high inflation seemed to have hit some sectors.
“GST collections rose 28% to ₹1.49 lakh crore in July on the back of economic recovery and measures taken to curb tax evasion,” the finance ministry said while releasing the numbers for the month on Monday.
The seasonally adjusted S&P Global India Manufacturing Purchasing Managers’ Index (PMI) rose to 56.4 in July from 53.9 in June on the back of a significant rise in business orders.
Global Headwinds Remain
“The divergence in India’s headline PMI relative to the rest of the region may also reflect the resiliency of India’s domestic demand recovery,” said Barclays chief India economist Rahul Bajoria.
“And even as global growth weakens, we expect India’s domestic growth to remain reasonably robust.” Data released last week showed the core sector grew 12.7% in June though it slowed from 18.1% in May.
The country’s largest passenger car manufacturer Maruti Suzuki reported an 8.3% increase in July sales from a year ago.
Power consumption was firm at 129 billion units in July though the increase from a year ago was only 2.9% because of the high base of last year when the patchy monsoon had pushed up demand.
Petrol and diesel sales rose 12% and 18%, respectively, in July over last year as economic activity expanded, though the low base magnified the growth.
“The PMI numbers and the GST inflows point to a robust momentum of economic activity in spite of the global headwinds,” said ICRA chief economist Aditi Nayar.
According to a survey by S&P Global, the Manufacturing Purchasing Managers’ Index has increased to 56.4 in July from June’s 53.9. The number has remained above the 50-level separating growth from contraction for a thirteenth month.
Activity growth in China also slowed, the private sector Caixin PMI showed on Monday, despite some easing of the strict domestic COVID-19 curbs that slammed the world’s second-largest economy in the second quarter.