Factory activity, GST collections jump in July. All you need to know

While the world at large may be worried about a looming recession, India’s economy is showing some very positive signals. At least, that is what the most recent economic trends seem to suggest.

Latest data show that India’s manufacturing sector grew at its quickest pace in eight months in July owing to robust growth in new orders and output as demand continued to advance on the back of easing price pressures.

Also, figures released by the government show that the goods and service tax (GST) revenue collected in July stood at Rs 1,48,995 crore. This is the second-highest ever since the introduction of GST and up 28% year-on-year.

What does the PMI data exactly show?

According to a survey by S&P Global, the Manufacturing Purchasing Managers’ Index 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.

The survey suggested that the Indian economy has remained resilient, at least for now, despite concerns over faster interest rate hikes, massive capital outflows, a weakening rupee and a rapidly slowing global economy.

While both new orders and output grew at their fastest pace since November, both input and output prices increased at their slowest rate in several months in a further boost to demand.

Why is this significant?

It is significant because if this uptick gets translated into overall price pressures, which have already shown signs of easing amid slowing commodity and food prices, it could provide some breathing space for the Reserve Bank of India.

The RBI, which has already hiked its key interest rate by a cumulative 90 basis points since early May, is expected to raise it again this week.

The International Monetary Fund recently cut India's growth forecasts to 7.4% and 6.1% for 2022 and 2023, respectively, from 8.2% and 6.9% in April amid downside risks from a slowing world economy.

What more does the PMI data show?

S&P Global’s survey also showed foreign demand expanded at the weakest pace in four months in July and optimism improved only a tad last month.

Firms increased headcount at the slowest pace in three months.

How much had the GST collection grown by in June?

GST collections had risen 56% year on year to Rs 1.44 lakh crore in June.

What more did the government say on GST collections?

The finance ministry said that, during July, revenue from import of goods was 48% higher and revenue from domestic transactions (including import of services) was 22% higher than revenue from these sources during the same month last year.

Central GST collected in July stands at Rs 25,751 crore, State GST is Rs 32,807 crore while Integrated GST is Rs 79,518 crore (including Rs 41,420 crore collected on import of goods). The cess collected is Rs 10,920 crore (including Rs 995 crore collected on import of goods).

Monthly GST revenues have been more than Rs 1.4 lakh crore for five straight months. The growth in GST revenue till July 2022 over the same period last year is 35%.

What did the government attribute this upsurge to?

“Better reporting coupled with economic recovery has been having positive impact on the GST revenues on a consistent basis. During the month of June 2022, 7.45 crore e-way bills were generated, which was marginally higher than 7.36 crore in May 2022,” the ministry added.