Economy holds steady in first half of FY25; manufacturing shows a hiccup in Q2: Data

Indian economy steady in first half

The Indian economy held steady in the first half of the year despite a slight hiccup in manufacturing in the second quarter of FY25, according to high-frequency data released on October 1.

"The economic performance during FY25 so far has been good, with demand drivers getting broad based as reflected in the strong growth of consumption and investment. The indicators so far for 2QFY25 suggest the same trend," said Paras Jasrai, senior analyst, India Ratings and Research.

GST collections tapered in September to Rs 1.73 lakh crore compared with Rs 1.75 lakh crore in the previous month, recording its slowest annual increase of 6.5 percent since June 2021.

However, it stayed above Rs 1.7 lakh crore for the seventh month.

Gross collections for the quarter were Rs 5.3 lakh crore, down from Rs 5.57 lakh crore in the first quarter of FY25. But collections for the first half at Rs 10.87 lakh crore were 9.6 percent, up from H1 of FY24.

"While YTD GST revenues (September 2024) has still grown by over 9%, the monthly growth is perhaps less than expected. This may need a closer look by the GST council , particularly in the wake of rate rationalisation excercise. However, with festive seasons coming, the collection for next couple of months might be better," said Pratik Jain, Partner, PwC India.

Similarly, while manufacturing slipped to an eight-month low of 56.5 in September, recording the slowest quarterly growth since Q3FY24, it stayed above the long-term average of 54.3.

"India's PMI has decreased slightly in Q2 but continues to signal growth and expansion in the industry. Rising GST collections reflect strong consumption and sustained economic momentum, pointing to a resilient economy despite some moderation in industrial activity," said Saurabh Agarwal, Tax Partner, EY.

Agriculture sector is likely to perform better with the season closing with 8 percent rainfall above normal. Data released by the agriculture ministry showing 1.5 percent higher sowing than the previous year and nearly 1 percent higher acreage than five-year average.

This is also reflected in auto sales numbers. While car manufacturers witnessed a decline in passenger vehicle sales, two-wheeler companies recorded jumps. India’s largest car maker, Maruti Suzuki, witnessed a three percent dip in PV sales in the first six months of the fiscal compared to a similar period in the previous year.

On the other hand, two-wheeler sales for Bajaj were up 20 percent in September and 12 percent for the April-September period.

Domestic two-wheeler sales were up 23 percent for TVS. On the other hand, Hyundai’s domestic dispatch was down six percent in September and Tata’s passenger vehicle sales dipped eight percent.

Personal vehicle registrations, as per VAHAN data, were five percent below in the second quarter of FY25.

Coal production slowed to 2.5 percent in September, and it was 5.9 percent higher at 453 MT for the April-September period compared with 427 MT in the first half of FY24.

Data released on September 30 showed core sector output contracting for the first time in nearly four years by 1.87 percent.

On the digital front, the Unified Payments Interface continued to show stellar growth for yet another month, with daily volumes crossing 500 million. The value of UPI transactions was up 31 percent from the previous year and has stayed above Rs 20 lakh crore for five months.

On the government front, capex growth has been slower for the first half of the year as well. Fiscal data released by data on September 30 showed that capex spending was 27.1 percent of the Budgeted estimate compared with 37.4 percent in the first six months of FY24.

Economists note that a pick-up in capex would be vital for growth to remain high in FY25.

The Indian economy grew 6.7 percent in the first quarter, slower than RBI’s anticipated 7.1 percent. The central bank expects Indian economy to log 7.2 percent in the second quarter.

Eye on revival 

Economists note that a further pick-up may be around the corner.

"Although the pv sales are down, the two wheeler sales have been good, so has been the trading activity with eway bills touching record highs. The moderation of inflation and the swift progress would help consumption demand get broad based. States are also expected to step up with their capex spends," said Jasrai.

Madan Sabnabvis, chief economist, Bank of Baroda notes that festive season would indicate a continuation of trends.

"On the whole there is good traction. Need to see if momentum picks up in October and November," Sabnavis said.