A spate of encouraging economic signals in recent weeks has injected optimism that the Indian economy is recovering fast in the wake of phased lifting of the lockdown imposed in the wake of the outbreak of the novel coronavirus since March 2020. With the festive season under way, the sprouting signs of the feel good factor has goaded renewed activities in the real sectors of the economy in these pandemic-hit times with the encouraging tidings of the uptick in the collection of the Goods and Services Tax (GST) for the month of October, 2020 as over 1.05 lakh crore of rupees has been gleaned from the GST in a single month. By far, this is the highest monthly yield from the indirect tax since February just prior to the pandemic spread in March and the first long lockdown the domestic economy had to undergo.
It needs to be noted that the 10.25 per cent increase in October came close on the heels of a 4 per cent rise in September. Set against the sixth successive months of contraction in GST revenue since March, this rising two-month trends reflect a recovery that is gaining momentum gradually but surely too. October spurt in GST revenues broadly relate to the real sectors activity in September, a month in which marked improvements were logged in a range of high-frequency indicators, including exports and the purchasing managers’ index (PMI) for manufacturing. To confirm that the resumption of activity is not just a flash in the pan, the country’s manufacturing sector improved for the third straight month in October with companies enhancing output to the greatest extent in 13 years amid robust sales growth.
The headline seasonally adjusted monthly survey, HIS Markit India Manufacturing Purchasing Managers Index (PMI) rose from 56.8 in September to 58.9 in October to portray the robust improvement in the health of this employment-oriented sector in more than a decade. In April, the index has slipped into contraction mode, after remaining in growth territory for 32 consecutive months. In PMI language, a print above 50 means expansion, while a score below that purports contraction. The survey authors said levels of new orders and output at Indian manufacturers continued to recover from the Covid-19 induced contractions noticed earlier in the year, with the PMI results for October reflecting historically-sharp monthly rates of expansion. Manufacturers indicated that the ongoing relaxation of Covid-19 curbs, better market conditions and improved demand helped them to secure new work in October. As big firms scaled up production further, the country’s largest automakers have clocked record sales in October, which is bound to bolster GST collections used to compensate States, an issue that has threatened to disturb the cooperative federalism in recent months.
Interestingly, the domestic services sector has moved in lock step with the manufacturing segment by registering a recovery in activity. While a revival of the manufacturing activity began in August, the tardy but manifest improvement in the services segment with solid expansion in new work and business activity in October that this major contributor to the country’s gross domestic product (GDP) is beginning to exert its sway for consolidating the tangible gains in the economy. A particularly noteworthy feature is that the country’s foreign direct investment (FDI) flows during the first five months of the current fiscal from April to August hit a huge point, albeit the pandemic, by rising 13 percent to more than 35 billion dollars, according to the Economic Affairs Secretary Mr. Tarun Bajaj.
Against this unfolding upbeat economic scenario, the Prime Minister Narendra Modi is chairing a virtual meeting with twenty large global investors, including several sovereign wealth and pension funds, to highlight India’s continued attraction as an investor preferred destination in the capital today. The message is loud and clear that in the uncertain period posed by the pandemic across the world, India remains a hope for pulling the global economy as it has the heft and weight with a billion plus populace and a massive market to serve and be served in turn.
Script: G. Srinivasan, Senior Journalist