Econ Wrap-Up: GST Collections Fall, Auto Firms Report Mixed Sales and S&P Cuts India GDP Estimates

What ails India's economy this week?

New Delhi: The Narendra Modi government was dealt a mixed bag of news on the economic front on Tuesday, even as it expects the upcoming festival season to perk up consumer demand and lift growth in the second half of this financial year. 

With auto sales continuing to drop for the month of September and the stock markets having handily shed their initial euphoria after the corporate tax cuts were announced, all eyes are on the Reserve Bank of India’s monetary policy review meeting later this week.

What are the latest economic blues? The Wire breaks it down.

September GST collection falls to 19-month low 

Government data released on Tuesday evening showed that collections under the GST (Goods and Services Tax) regime declined to Rs 91,916 crore in September 2019, as against Rs 98,202 crore in the preceding month.

The revenue collection in the same month a year ago stood at Rs 94,442 crore.

Also read: What Should India’s Tax Reform Trajectory Look Like?

“The total gross GST revenue collected in the month of September, 2019 was ₹91,916 crore of which Central GST (CGST) was ₹16,630 crore, State GST (SGST) was ₹22,598 crore, Integrated GST (IGST) was ₹45,069 crore (including ₹22,097 crore collected on imports) and Cess is ₹7,620 crore (including ₹728 crore collected on imports),” an official statement said.

Generally-speaking, collections of over Rs 1 lakh crore a month are seen as healthy.  The dip in September is, therefore, reflective of the larger slowdown in the Indian economy.

Maruti Suzuki and Tata Motors sales fall again

Both auto companies reported less-than-ideal sales numbers for September 2019, continuing many months of low sales in the overall industry.

Maruti Suzuki, India’s largest car-maker, reported a 24.4% decline in sales at 1.22 lakh units in September 2019. The company had sold 1.62 lakh units in September 2018, it noted in a statement.

Domestic sales declined by 26.7% at 1,12,500 units last month as against 1,53,550 units in September 2018, it added. Sales of mini cars comprising Alto and WagonR stood at 20,085 units as compared to 34,971 units in the same month last year, down 42.6%. 

Tata Motors, on the other hand, also posted equally worrying numbers but added that it expected sentiment to pick up in the next few months. In a statement put out on Tuesday afternoon, the company stated that it had sold 36,376 units in September 2019, a decline of 48% compared to the 69,991 units it had sold in the same month last year.

Also read: RBI to Pick up Slack as India Stimulus Measures to Fall Short: Economists

Total domestic sales were down 50 per cent at 32,376 units as compared to 64,598 units in September last year, it added.

“With the ongoing subdued demand, we continued our focus on system stock correction by driving retail and aligning production,” Tata Motors’ president of the commercial vehicles business unit, Girish Wagh said.

“We are monitoring the impact of the relief package announced by the government, and look forward to improved demand from revival in consumption and spend in infrastructure projects,” he added.

Manufacturing PMI hasn’t picked up 

There was no major pick-up in terms of activity in India’s manufacturing sector in September amid subdued demand conditions both domestically as well as externally, a monthly survey said on Tuesday. 

The IHS Markit India Manufacturing PMI was at 51.4 in September 2019, unchanged from August 2019. It thereby posted its is joint-lowest reading since May 2018.

Sensex falls 700 points at day’s lowest

The benchmark 30-share Sensex fell over 700 points during the lowest point of trading on Tuesday, with the broader Nifty index falling to 11,247 on the back of selling in banking and realty stocks.

The last few days have been tough for India’s stock markets, especially for players in the Nifty bank Index, which was down 2.5% on Tuesday. Yes Bank’s shares, in particular, tumbled by 25%.

Much of the panic in the markets stems from the ongoing crisis at Punjab and Maharashtra Cooperative (PMC) bank, which is providing a glimpse of how the liquidity and debt crisis in India’s real estate sector could very easily spread and spiral out of control.

Also read: Will the Corporate Tax Cut Boost the Economy?

“We expect that weak macro data points as well as disappointing auto sales numbers may also weigh on the investor sentiments in the near term. We expect that the RBI monetary policy may provide further direction to the markets. We envisage a 25 bps rate cut in the policy. However, the central bank’s outlook on inflation and growth would be a key monitorable,” said Ajit Mishra, vice-president for research at Religare Broking, in a statement.

S&P Global Ratings cuts India growth forecast

Media reports on Tuesday noted that S&P Global Ratings had cut India’s growth projection for FY’20 to 6.3% from the 7.1% it had estimated earlier.

In its quarterly report on the Asia-Pacific region, S&P noted that nevertheless it expected New Delhi to stage a “decent, albeit unspectacular” recovery in FY’21 to 7%.

“India’s slump is deeper and more broadbased than we expected. In the March-June quarter, the economy expanded by just 5%, well below potential, which we estimate to be north of 7%. Most alarming has been the precipitous decline in private consumption growth that had been the engine of the economy in recent years — down to about 3% in the March-June quarter,” reports quoted the global credit rating agency as saying. 

S&P Global Ratings added that while the much-awaited signs of investment recovery were slowly emerging, it had not done enough to offset weak consumption.