India's economy ended the first quarter of the year on a mixed footing, with Goods and Services Tax (GST) collection growth declining to a four-year low of 6.1 percent in June, even as manufacturing activity rose to a 14-month high, according to data released over the last two days.
Although GST collections stood at Rs 1.85 lakh crore—slightly above the previous year’s average of Rs 1.84 lakh crore—they remained lower than the Rs 2 lakh crore mark crossed in May.
"Around 6% growth in GST collections, coupled with less than 4% growth in advance tax collection for the first quarter of FY26, does indicate softening of demand and a cautious outlook. One of the reasons could be conservative spending by consumers, which may improve in the coming months with an overall improvement in the geopolitical situation," said Pratik Jain, Partner, Price Waterhouse & Co LLP.
Unified Payments Interface (UPI) transaction values also remained strong, staying above Rs 24 lakh crore. However, growth slowed to the lowest level in five years, slipping below 20 percent for the first time since April 2020.
Auto sales presented a mixed picture. Maruti Suzuki, the market leader, recorded a 13 percent decline in dispatches, while Tata Motors witnessed a 15 percent year-on-year drop. In contrast, Mahindra and Mahindra (M&M) reported an 18 percent increase in SUV sales, indicating uneven consumption trends across urban markets. Hyundai's domestic sales fell 12 percent from the previous year. In the two-wheeler segment, TVS Motor reported a 10 percent increase in June sales, whereas Bajaj Auto saw a 16 percent decline. Eicher Motors, which manufactures Royal Enfield motorcycles, reported a 16 percent increase in domestic dispatches during the month.
Manufacturing showed contrasting trends as well. The manufacturing Purchasing Managers’ Index (PMI) rose to 58.4 in June, a 14-month high, lifting the quarterly average to 58.1.
According to HSBC India’s chief economist Pranjul Bhandari, "India’s manufacturing PMI reached a 14-month high of 58.4 in June. Robust end-demand fuelled expansions in output, new orders, and job creation."
However, Index of Industrial Production (IIP) data released on June 30 revealed a slowdown, with growth declining to 1.8 percent during the first two months of the fiscal year, compared with 5.7 percent in the same period last year. "Tepid industrial volume growth in the first two months of the quarter doesn't augur well for industrial GVA growth in Q1 FY2026," said Aditi Nayar, Chief Economist at ICRA.
Amid these mixed signals, agriculture emerged as a bright spot. Monsoon coverage improved significantly after mid-June, with rainfall 9 percent above the long-term average as of June 27. Sowing activity also picked up, with total sowing 11 percent higher than the previous year. Rice sowing increased by 47 percent, and pulses saw a 37 percent rise compared with June 2024.
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