India weathered global turbulence, inflation in June

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India weathered global turbulence, inflation in June

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India’s economy managed to fend off global headwinds, high inflation rising interest rates, and a lingering Covid-19 pandemic with several high-frequency indicators remaining firm in June, rounding up a strong April-June quarter.

Goods and services tax (GST) collections rose 56% from a year ago to? 1.44 lakh crore in June, automobile companies posted robust sales, railway freight loading rose 11%, and fuel and power consumption remained strong, suggesting robust economic activity.

The S&P Global India Manufacturing Purchasing Managers’ Index (PMI) dropped to 53.9 in June from 54.6 in May but remained firmly in the expansion zone. A reading above 50 on this survey-based index shows expansion.

“Despite a challenging global backdrop, most high-frequency data in India shows the resiliency of growth in Q1 FY22-23,” said Barclays chief India economist Rahul Bajoria. “In our view, the decline in the PMI is not large enough to suggest the economy is slowing,” Barclays said in a separate note. “We see it as resilient and holding off rising inflation pressures.”

Railway freight loading in June 2022 stood at 125.5 million tonnes, up from 112.8 million tonnes in the year earlier. Petrol and diesel sales jumped 29% and 35%, respectively, in June from the year before. They rose 3% and 11.5% from May.

Beating Estimates

Electricity demand grew 17% in June to 134 billion units from 115 billion units a year ago as peak demand hit a record of 212 GW.

Data released on Thursday showed the core sector output expanded at a 13-month high of 18.1% in May, boosted partly by a favorable base.

This is the fifth time that monthly GST collections crossed? 1.4 lakh crore since the tax was rolled out in July 2017 and the fourth month in a row since March 2022, the finance ministry said in a statement.

Finance Minister Nirmala Sitharaman said?1.4 lakh crore is the “rough bottom line” for monthly GST revenue collections.

Experts said the economy has done better than expected in the first quarter of FY23, though tightening monetary conditions, weaker global growth, and higher commodities and fuel prices are expected to weigh on growth.

The recovery in contact-intensive sectors has helped make up for the hit on consumption due to high inflation and rising interest rates.

India’s gross domestic product (GDP) growth slowed to 4.1% in the January-March quarter as FY22 ended with an 8.7% expansion.

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