India’s recent numbers have been much analysed, discussed – and of course, debated over the last few days. Much of this debate has focused on the headline numbers and comparing the GDP numbers with the RBI forecast for the first quarter.
Most similar economic information can be considered as news – and with news, there is often a lot of noise. Therefore, there is a need to extract valuable information in the form of the signal that is contained in the latest economic numbers. Broadly, there are four such indicators that are of immediate interest to me.
Let us begin with India’s manufacturing sector where we have the S&P Global India Manufacturing Purchasing Managers’ Index. This index is seasonally adjusted and for July, it was at 56.4 while for August it was 56.2. The report further highlights production volumes were supported by a pick-up in exports and upbeat projections for the year ahead.
The degree of optimism was incidentally the highest in six years. Given the fact that firms have their skin in the game, their expectations guide their decisions, and they have appropriate incentives to behave rationally than most other economic agents. This is perhaps why their optimism is also reflected in their decisions to invest in capacity expansion as credit offtake has been decent. Overall, the manufacturing sector growth seems to be decent.
Another indicator that should be used to corroborate this would be the quarterly Periodic Labour Force Survey (PLFS).
The unemployment rate in the economy is down to 7.6% between April and June 2022 and this is the lowest since the survey began in the first quarter of 2018. Another labour market indicator that is often of interest is the Labour Force Participation Rate (LFPR), which is defined as the percentage of people who are working or seeking work in the population. LFPR has been steadily increasing over the last few quarters and was at 47.5% during April-June 2022 round of the survey.
Now, we turn to a high-frequency indicator that gives us some idea about consumption. August GST collections stood at Rs 1.44 lakh crore – the sixth straight month for mopup higher than Rs 1.4 lakh crore. The ongoing rigorous effort to curb tax evasion can at the margin explain the improvement in tax collections. However, the third part of the puzzle is explained by higher levels of inflation. However, mere increases in inflation won’t increase GST collections as higher prices may suppress consumption. Besides, retail consumer price inflation has been much lower than the recent implied GDP deflator.
Read more at: https://economictimes.indiatimes.com/news/economy/policy/india-growth-story-finds-its-basis-in-political-stability-consistent-policy-reforms/articleshow/93989462.cms
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