Introduction
According to the provisional estimates of Gross Domestic Product (GDP) released on May 31, 2022, the Indian economy in 2021-22 has fully recovered the pre-pandemic real GDP level of 2019-20. Real GDP growth in FY 2021-22 stands at 8.7%, which is 1.5% higher than the real GDP of FY 2019-20. As of July 11, 2022, the South-West monsoon has covered the entire country, resulting in actual rainfall, which is 7% higher than the normal level. The government's continuous effort to raise capital expenditure has led to its year-on-year (YoY) growth of 70.1% in May 2022. The government has also announced rules for disbursing Rs.1 trillion (US$ 12.51 billion) in interest-free capex loans to states to facilitate the capex further.
With significant growth in net sales in the first quarter of FY 2022-23, aided by a general improvement in demand, the corporate sector has started to show signs of revival. Rising interest coverage ratio which is a sign of improved credit health across most industries, is a result of rising operating profit margin of the corporates. The expansion of the PMI manufacturing and services indices show that the momentum in the manufacturing and services sectors is maintained in the first quarter of FY 2022-23. Industrial metal prices have dropped to their lowest level in sixteen months, and other food-related commodities have seen a decline in price from their peaks as well. With the economic scenario improving on recovering from the COVID-19 pandemic shock, the Indian economy has remained resilient and provides a positive growth potential ahead.
In July 2022, the following key frequency indicators highlighted improved performances:
- Private consumption stood at 57.5% of the nominal GDP in FY 2021-22, indicating that it is becoming a macro growth driver.
- Rice, wheat, gramme, and maize production are expected to be at record highs. According to the second advance projections of foodgrain production for FY22, overall foodgrain production is expected to reach a record high of 316.1 million tonnes, 2.85% higher than the objective set, thanks to higher output of Kharif crops and record acreage under rabi crops.
- According to data released by the Ministry of Statistics & Programme Implementation (MoSPI), India’s Consumer Price Index (CPI) based retail inflation reached 7.01% YoY in June 2022 compared to 7.04% YoY in May 2022 due to moderation in food inflation.
- In June 2022, the Manufacturing Purchasing Managers’ Index (PMI) in India stood at 53.9 from 54.6 in May 2022.
- PMI Services was at 59.2 in June 2022 compared to 58.9 in May 2022.
- Fuel consumption in June 2022 stood at 18,269 (thousand MT) as compared to 18,200 (thousand MT) in April 2022
- In May 2022, the overall IIP (Index of Industrial Production) stood at 137.7. The Indices of Industrial Production for the mining, manufacturing and electricity sectors stood at 120.1, 134.5 and 199.9, respectively, in May 2022.
- In May 2022, the eight sectors' output index stood at 148.1.
- Traffic handled at major ports stood at 196,706 thousand tonnes between April-June 2022.
- Railway freight traffic growth stood at 125.5 MT in June 2022, an increase of 11.28% YoY led by incremental loading of coal, cement, and clinker.
- In March 2022, freight movement increased by 0.3% compared to the previous year, indicating that the increase in air freight and traffic activity has been maintained.
- 78.1 million e-way bills were raised during March 2022, which is 13% higher compared to February 2022.
- In April 2022, the government approved the participation of 61 companies in the PLI scheme for textiles, with a proposed total investment of Rs. 19,077 crore (US$ 2.46 billion), and an expected turnover of Rs. 1.84 lakh crore (US$ 23.74 billion), leading to employment generation for about 2.4 lakh people.
- In June 2022, the gross Goods and Services Tax (GST) revenue collection stood at Rs. 1.44 trillion (US$ 18.1 billion).
- In June 2022, the Indian basket of crude oil reached US$ 116.06 a barrel, compared to US$ 109.51 in May 2022.
- In June 2022, UPI transactions were valued at Rs. 10.14 lakh crore (US$ 128.3 billion), as compared to Rs. 10.41 lakh crore (US$ 131.74 billion) in May 2022.
- In June 2022, India’s merchandise exports stood at US$ 37.9 billion compared to US$ 32.49 billion in June 2021, registering a 16.78% YoY increase.
- In July 2022 (until 27 July 2022), Foreign Portfolio Investment (FPI) outflows stood at Rs. 230,191 crore (US$ 28.76 billion)
- In the second half of February through March 2022 (up to March 13), daily liquidity absorptions under the liquidity adjustment facility (LAF) averaged Rs. 8.4 lakh crore (US$ 111.27 billion), up from RS. 7.4 lakh crore (US$ 98.02 billion) in the second fortnight of January to mid-February 2022.
- As of April 22, 2022, reserve money stood at Rs. 4,002,311 crore (US$ 523.6 billion).
- As of April 22, 2022, currency in circulation (CIC) registered Rs. 3,209,394 crore (US$ 419.86 billion).
- Rupee strength reached Rs. 79.22/US$, as of July 29, 2022.
- In FY 2021-22, India received a total of US$ 58.77 billion in foreign direct investment.
- As of 15 July 2022, India’s foreign exchange reserves stood at US$ 572.7 billion.
- According to RBI:
- Bank credit stood at Rs. 120.27 trillion (US$ 1.52 trillion), as of 20 May, 2022.
- Credit to non-food industries stood at Rs. 119.74 trillion (US$ 1.51 trillion), as of 20 May, 2022.
Electricity consumption, manufacturing PMI, exports, power supply and other high-frequency indicators indicate that the pace of economic activity has fully recovered from the COVID-19 pandemic shock. Economic growth is anticipated to be fueled by the effective implementation of PLI schemes, development of renewable energy sources while diversifying import dependence on crude oil and bolstering of the banking sector. The recovery in the services sector is still going strong while manufacturing strength remains stable. There appears to be a strong desire for private sector investments. The stress tests conducted by the central bank show that banks are quite financially sound and ready to lend. Monthly GST receipts are strong, confirming the economic activity's vigour. The successful launch of the Production Linked Incentive Scheme, developing renewable energy sources while diversifying import dependence on crude oil and strengthening the financial sector is expected to drive economic growth. Overall, the first ten days of July and June were better than the first two months of FY 2022–23, which is a cause for comfort and even cautious optimism in these testing times.
Between April 2000-March 2022, cumulative FDI inflows to India stood at US$ 588.53 billion. The central government finances registered improved performances. In the review period, the corporation tax recorded 91.6% YoY growth. Between April 2021 and October 2021, custom revenue collection registered 122.3% YoY growth, and the IGST collection to the Centre increased by 40% YoY, primarily due to the recovery of economic activities. Net collections of direct taxes in FY 2021-22 (until March 16, 2022) stood at Rs. 13.63 trillion (US$ 175.83 billion) compared to Rs. 9.18 trillion (US$ 118.42 billion) in FY 2020-21.
Note: Conversion rate used for July 2022 (as of July 29, 2022) is Rs. 1 = US$ 0.013
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