Consumption steady in November, manufacturing activity a worry

Consumption story stays fine, manufacturing a concern

The Indian consumption story remained intact for the second consecutive month; however, in a worrying trend, manufacturing showed a slight downturn in November, according to high-frequency data released at the start of the month.

While GST sales were slightly lower in November, at Rs 1.82 lakh crore, compared to Rs 1.87 lakh crore the previous month, the data indicated a robust 8.5 percent growth from the previous year.

November also marked a second consecutive month of over Rs 1.8 lakh crore collection under the indirect tax regime.

This euphoria was also indicated in auto sales data, where the largest automaker recorded a 5 percent rise in domestic wholesale dispatches. Tata’s sales were also up, but Hyundai witnessed a decline in wholesale dispatches. SUVs have been dominating the market. Companies reported further increase in rural penetration.

UPI transactions recorded yet another month of over Rs 20 lakh crore, although the number slightly declined from the previous month. Daily transactions were down to Rs 71,000 crore from Rs 75,000 crore in the previous month.

On the other hand, the two-wheeler industry was a mixed bag, with both Bajaj and Hero recording a decline in sales but TVS indicating a rise.

The wedding season and robust rural demand, owing to a good kharif season, have infused confidence in the rural market, while urban demand has been muted.

Agriculture's 3.5 percent growth was one of the bright spots of a dull second quarter, in which growth momentum fell to a seven-quarter low of 5.4 percent.

Manufacturing was one of the significant factors for decline, with the sector recording a slump to 2.2 percent growth compared with 7 percent in the previous quarter.

The news from manufacturing wasn’t too welcoming either in November, with activity falling to a joint 11-month low owing to rising cost pressures.

Infrastructure growth showed some promise in October rising for the second consecutive month to 3.1 percent, but the economy would need to sustain the trend to achieve over 6.5 percent growth.

Early signs show some promise. Coal production was up 7 percent in November compared with the previous year.

Capex spending would also need to pick up, as the Chief Economic Advisor said as part of his post-GDP data release remarks.

Economists have revised their growth forecasts down in light of second quarter data, with some predicting that the Indian economy may not even reach 6.5 percent growth in FY25.

The economy would need to grow 7 percent in the second half to push the overall growth to 6.5 percent, as the first half growth was a mere 6 percent.