Week in Numbers – Tracking India’s Economic Pulse

Nut Graph
The contraction in direct tax collections so far has raised doubts about the government’s ability to meet its fiscal deficit target in the current financial year. The decline was primarily on account of a fall in income tax collections due to the sops announced in the Budget. 

The government’s proposal to reform the goods and services tax structure will add to the pressure. As per the proposal, the government is planning to move to a two-rate slab of 5% and 18%, with a small set of ‘sin’ goods taxed at 40%. This will mean that most items currently in the 12% and 28% categories will shift to the 5% and 18% categories, respectively, putting huge pressure on government finances.

The government finances were already under strain with fiscal deficit more than doubling to ₹2.81 trillion in the first quarter, even after the Reserve Bank of India transferred a record ₹ 2.69 trillion as surplus to the central government.

Week in Numbers

Crop gains mask inflation risk

99.56 million hectares - Kharif acreage rose 4.0% year on year, led by a 12.1% jump in rice acreage to 36.48 million hectares. While pulses acreage rose 0.2%, oilseeds fell 3.7%, raising the risk of higher food imports and price pressures later in the year.

Monsoon lifts water storage
590.5 millimetres - Cumulative rainfall to August 16 was 0.4% above the long-period average. Reservoir storage rose to 135.28 billion cubic metres, 74.1% of capacity, boosting Rabi prospects. Current levels are 23.8% above normal.

Food grains stocks
86.94 million tonnes - Food grain stocks with the Food Corp. of India as of August 1 rose to a four-years high, leaving scope for the government to intervene in the market to contain food prices. 

Forex buffers improve
$693.62 billion - Reserves as of August 8, up $4.75 billion on week and up $25.29 billion so far this fiscal year.

Tractor sales slow
64,320 units - Domestic tractor sales growth slowed to 8.0% year on year in July from 10.5% in June, despite a low base. For context, domestic sales in July are 1.4% lower than the 63,137 tractors sold in July 2021.

Passenger vehicle sales remain weak
301,251 units - Passenger vehicle sales grew just 1.5% year on year in July, despite a low base. Two-wheeler sales, however, improved 8.7% on year to 1.57 million units.

Trade deficit widens 
$27.35 billion -The merchandise trade deficit widened to an eight-month high as imports grew faster than exports. Exports rose 7.3% on year, the first increase in three months, as traders likely shipped early to beat the US tariff deadline.

Port traffic at major ports
5.2% - Cargo traffic at government-owned major ports rose to 293.05 million tonnes in April-July, driven by 7.1% growth in petroleum and gas and 11.1% growth in container traffic.

Non-life premium income slows
₹296.88 billion - Growth in gross premium underwritten by non-life insurers slowed to 2.6% on year in July from 5.1% a month earlier. General insurance premiums declined 0.5%, while standalone health insurers’ premium rose 24.2%.

Retail inflation slows 
1.55% - CPI inflation fell to an eight-year low in July, driven by deflation in food items and a favourable base effect. The index rose 0.9% month on month, the fastest increase in nine months.

Wholesale prices move deeper into deflation 
(-)0.58% - WPI inflation fell to a two-year low in July, due mainly to deflation in food and fuel. The index rose 0.4% on month, the sharpest rise in nine months.

Direct tax collections fall 
₹6.64 trillion - Direct tax collections contracted 3.9% year on year up to August 11, primarily due to lower income tax receipts after Budget sops. Income tax collections declined 7.5%, but corporate tax collections rose 2.9%.

FX borrowings rise 
$3.44 billion - External commercial borrowings by Indian companies in June rose from $2.74 billion in May and $2.82 billion in June last year.

Coming up

• August 20 — Eight Core Industries index for July
• August 21 - HSBC Flash PMI for August
• August 28 – IIP for August
• August 29 — GDP for April–June
• August 29 - Government finances for April-July
• September 1 - HSBC India Manufacturing PMI for August
• September 1 — GST collections for August
• September 3 — HSBC Services & Composite PMI for August.
  
  Tailpiece
  US CPI inflation has come in at 2.7% year on year in July, marginally lower than the consensus estimate of 2.8%. This has strengthened expectations of a rate cut by the Federal Open Market Committee in September. According to the CME FedWatch Tool, there is a 92.1% probability of the Fed cutting rates by 25 basis points, compared with 50.8% a month ago. However, the chances of a rate cut by the Reserve Bank of India later this year still hang in the balance.