Festival spirit boosts October: Manufacturing rebounds, tax collections rise

Festive boost for Indian economy at the start of October

Festival season lifted spirits at the start of the third quarter, with manufacturing and tax collections rising further in the month, according to data released over the last week.

“The festive season seems to have lifted the economic activity as both Dusshera and Diwali happened in the same month,” said Paras Jasrai, senior analyst, India Ratings and Research.

Data released on November 4 showed that manufacturing rebounded in October to 57.5 from a nine-month low of 56.5 in September.

Although still in double digits, Goods and Services Tax collections were also at a six-month high of Rs 1.87 lakh crore, up 8.9 percent in October and 8.1 percent higher sequentially.

“There is a case for believing that growth is on target. Cumulative tax collections higher than last year indicate consumption is rising and give comfort, given the view of some FMCG companies that urban demand is lagging. Prospects from the rural side also look good,” said Madan Sabnavis, chief economist, Bank of Baroda.

Experts indicate that single digit growth does indicate some slowdown in consumption.

"Recent GST collections indicate a potential slowdown in consumer spending in India, which surged in the previous fiscal year. The single-digit growth signals a cooling-off period," said Saurabh Agarwal, Tax Partner, EY.

Passenger vehicle wholesale dispatches were flat in October as compared with a similar period in the previous year.

According to the government's VAHAN database, vehicle registrations were 34 percent higher, whereas two-wheeler registrations were up 36 percent from October 2023.

Sales of Hero MotoCorp were 18 percent higher in October as compared with the year-ago period.

Coal production was up 7.5 percent in October compared with the previous year.

Data indicates a rise in UPI transactions as well. In October, digital transactions rose to their highest level of 16.58 billion in volume and Rs 23.5 lakh crore.

UPI transactions had reached 15 billion in the previous month, while the value had remained around Rs 20.6 lakh crore.

October marks the sixth consecutive month of over Rs 20 lakh crore transactions.

FASTag volumes also indicate an 8 percent rise from the previous month, to 345 million in October, compared with 318 million in September. The value of transactions rose to Rs 6,115 crore from Rs 5,620 crore.

The Reserve Bank of India has set a target of 7.4 percent growth for the economy for the last two quarters of the year.