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The Finance Ministry, in its July economic report, has upheld its growth projection for the current financial year (FY25) at 6.5-7%. This announcement comes just ahead of the anticipated release of GDP figures for the April-June quarter, despite cautious outlooks from the Reserve Bank of India’s (RBI) consumer confidence and industrial surveys.
“As of now, the projection of real GDP growth of 6.5-7 per cent for FY25, made in the Economic Survey for 2023-24, seems appropriate,” the report stated.
Concerns Over Consumer and Industrial Outlooks
The Finance Ministry has highlighted the need to monitor the consumer and industrial outlook surveys, which revealed a declining trend. The consumer confidence survey for July 2024 showed reduced optimism regarding the general economic situation, employment, and prices.
Similarly, the RBI’s industrial outlook survey indicated a decline in both current assessments and future expectations within the manufacturing sector as of August.
Government Spending to Increase Post-Election
After a slowdown in capital expenditure (capex) during Q1FY25, attributed to the general election, the Finance Ministry expects a rebound in the remaining months of the fiscal year. The report noted that total expenditure and capex were down 7.7% and 35% year-on-year, respectively, in April-June 2024.
However, the Ministry emphasized that high levels of capex would continue to support the ongoing private investment cycle.
Positive Trends in Economic Activity
Despite some challenges, the Ministry highlighted strong performance across various economic indicators in July 2024. The report pointed to substantial growth in goods and services tax (GST) collections and a significant rise in e-way bill generation, indicating increased economic activity. Stock market indices also reached record highs during the month.
“The month saw impressive milestones being reached, substantial growth in goods and services tax collections, and a significant rise in e-way bill generation, which points to an overall increase in economic activity,” the report noted.
Resilient Manufacturing and Services Sectors
The July report also underscored the robust performance of the manufacturing and services sectors. The RBI’s surveys showed growth in capacity utilization, expansion in sales, and an increase in new orders within the manufacturing sector.
Meanwhile, the contact-intensive services sector, particularly tourism and hospitality, has seen significant gains.
Fiscal Consolidation on Track
On the fiscal front, the Ministry reported that the Union Budget for FY25 is aligned with a planned path for fiscal consolidation.
With strong revenue collection, disciplined revenue expenditure, and an overall strong economic performance, the fiscal deficit is projected to decline.
Market Performance and E-Way Bill Generation
India’s stock market saw a bullish run in July 2024, with the Nifty 50 and BSE Sensex 30 indices hitting new peaks. E-way bill generation also set a new record, with a year-on-year increase of 19.2% in July and a month-on-month rise of 4.7%. This ongoing growth is expected to boost GST collections in the coming months.
Inflation and Export Performance
Retail inflation dropped to 3.5% in July 2024, the lowest since September 2019, due to moderated food inflation and steady progress in the southwest monsoon.
Additionally, the report noted that exports of both goods and services are performing better than the previous year, contributing to the overall resilience of the domestic economy.
