Theme: Macro Economy | Will high GST refunds and sluggish state economies derail India’s growth?

In this State of the Economy podcast, businessline’s Shishir Sinha talks to Aditi Nayar, Chief Economist, ICRA, to discuss recent high-frequency economic indicators that have made headlines over the past few days.  

The episode dives into topics such as GST collections, state-wise economic performance, the Purchasing Managers' Index (PMI), and GDP growth, offering a nuanced understanding of India's economic landscape. 

Sinha begins by addressing the recent GST collections, noting a 10% year-on-year increase but a sequential dip. Nayar explains that the year-on-year figures are more reliable due to the inherent seasonality in monthly GST collections. She emphasises that the typical spikes seen post-quarter-ending months are followed by expected dips, and hence, the sequential decline should not raise concerns at this point. Additionally, she mentions the high refunds this month, suggesting the need for a few more months of data before drawing any conclusions. 

A significant portion of the discussion revolves around GDP growth. Nayar shares her observations on the Q1 growth rate of 6.7%, which, although lower than RBI’s estimates, was slightly higher than ICRA’s expectations. She attributes this to stronger-than-anticipated performance in sectors like construction, public administration, and agriculture. Looking ahead, she anticipates a temporary dip in Q2 due to high base effects but expects a back-ended recovery in H2, supported by increased government capital expenditure and a favorable agricultural outlook. 

The episode wraps up with a discussion on fiscal deficit and retail inflation. Nayar expresses cautious optimism about the government’s ability to meet its capital expenditure targets despite the challenges posed by the monsoon and compressed timelines.  

(Host: Shishir Sinha, Producer: Amitha Rajkumar)

About the State of the Economy podcast

India's economy has been hailed as a bright spot amid the general gloom that seems to have enveloped the rest of the world. But several sectors continue to stutter even as others seem set to fire on all cylinders.