India’s manufacturing activity remained strong a month after hitting a decade high and indirect tax collection increased ₹$ 1 trillion for the second month in a row in November, indicating that the recovery process in Asia’s third-largest economy may still be underway.
The deepening contraction in growth in the core sector comprising eight infrastructure sectors in October after approaching zero in September had raised questions about the sustainability of the normalization process in the economy.
Data released by analytics firm IHS Markit on Tuesday showed that the purchasing managers index (PMI) for the manufacturing sector fell to a three-month low at 56.3 from a more than 12-year high of 58.9 in October, but stayed strong.
A figure above 50 indicates expansion, while below 50 indicates contraction.
Separately, data from the Ministry of Finance showed that central and state governments’ goods and services tax (GST) revenue reached 1.05 trillion for the second month in a row, an increase of 1.4% from revenue collected. in the same month a year ago, after the sharp drop. in the initial months after the national shutdown.
After showing a year-on-year contraction in the period from April to August, GST revenues showed a positive trend in September, which was accentuated in October, indicating that the economic recovery is in line with the lifting of the blocking restrictions.
According to PMI data, factory orders, exports, purchasing levels and production saw a slow recovery, while restrictions related to the pandemic caused a new drop in payroll figures. Input costs and production charges increased at accelerating rates that, however, remained below their respective long-term averages.
Pollyanna De Lima, associate director of economics at IHS Markit, said the moderation in expansion rates seen in the past month does not represent a major setback, as they are below a decade high in October, an increase in growth rates. COVID-19 cases and the possibility of associated restrictions could undermine recovery. “For now, companies are projecting sustained growth in demand in the short term and responded to this by increasing the purchase of inputs to increase their safety stocks. Employment remained in contraction territory and companies reportedly kept the minimum number of workers possible according to government guidelines, “he added.
Outside ₹1.05 trillion of revenue raised in November, the central GST is ₹ Rs 19,189 crore, the state GST is ₹ 25,540 crore, IGST is ₹ 51,992 crore and cess is ₹8242 crore. November receipts refer to sales made in October.
An official statement from the Ministry of Finance said that the total revenue earned by the central government and state governments after the regular liquidation in the month of November is ₹ 41,482 crore for CGST and ₹ 41,826 crore for SGST.
Pratik Jain, a partner at PwC India, said the GST collection trend continues to reinforce the belief that the economy is recovering rapidly. “Now that the festival season is over, it remains to be seen if the December collection is also buoyant. The other encouraging aspect is a gradual increase in the number of GST declarations now being filed, indicating that the overall compliance level is improving with increased use of technology and initiatives such as electronic invoicing by the government. ” added.
The rate of contraction of the Indian economy slowed in the September quarter to 7.5% from a record high of 23.9% contraction in the June quarter. While some research agencies have revised up their GDP forecasts for India, S&P Global Ratings on Monday stuck to its previous forecast of a 9% drop in GDP in fiscal year 21 and expects more evidence of a sustained recovery in economic activities.
“While there are now upside risks to growth due to a faster recovery in population mobility and household spending, the pandemic is not completely under control. We will wait for more signs that infections have stabilized or slowed, along with high-frequency activity data for the third quarter of the fiscal year, before changing our forecasts, “he said Monday.
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