Strong growth accompanied by stable inflation and external account and progressive employment outlook will help the Indian economy close the current financial year on a positive note. Representational file image.
| Photo Credit: Reuters

The Finance Ministry on March 22 said with an uptick in private investment and inflation trending down, India’s outlook for the next fiscal looks positive.

The Monthly Economic Review also said that inclusion of Indian bonds in Bloomberg bond index from January 2025 should bolster inflows.

Also read | Moody’s pegs this year’s growth at 8%; higher than the official 7.6% projection 

It said robust investment activity is driving growth amid a steady rise in consumption.

“The continued focus on public investment seems to have crowded in private investment,” said the February edition of the review by Department of Economic Affairs.

The National Statistical Office (NSO) has revised upwards the GDP growth estimate for current fiscal to 7.6% from 7.3%.

India grew above 8% for three consecutive quarters, reaffirming its position as a standout performer amid sluggish global growth trends. Various agencies echo a similar sentiment revising the FY24 growth estimates of India closer to 8%, the Ministry said.

“On the whole, India looks positively towards the dawn of FY25,” the review said.

It said increased demand for residential properties in tier-2 and tier-3 cities augurs well for furthering construction activity.

Non-farm employment has revived, improving the capacity to absorb the labour leaving agriculture.

“The ascent of manufacturing sector employment is expected to be marked by upscaling of enterprises and sunrise sectors emerging as catalysts for generating quality employment,” it added.

It said strong growth accompanied by stable inflation and external account and progressive employment outlook will help the Indian economy close the current financial year on a positive note.

“There are headwinds like indications of hardening crude oil prices and global supply chain bottlenecks to trade. Nonetheless, India, on the whole, looks forward to a bright outlook for FY25,” the monthly review said.

It said India’s inflation outlook for the upcoming months is positive.

Core inflation is trending downwards, indicating a broad-based moderation in price pressures. The pick-up in summer sowing is likely to help reduce food prices, it added.

Growth in the Personal Income Tax revenues continued to outstrip Corporate Income Tax. Representational
| Photo Credit: C. Venkatachalapathy

India’s net direct tax collections picked up pace over the past month to rise 20.25% year-on-year by February 10, compared to a 19.4% uptick on the same date in January, as per data released by the Finance Ministry on Sunday.

Growth in the Personal Income Tax (PIT) revenues continued to outstrip Corporate Income Tax (CIT), with a 26.91% uptick in net PIT collections vis-à-vis a 13.6% rise in CIT inflows so far this year.

From ₹14.7 lakh crore on January 10, net direct tax collections, that are calculated by deducting refunds from gross tax inflows, had hit ₹15.6 lakh crore by Saturday, constituting 80.23% of the revised estimates for direct taxes for this year.

Higher direct tax expectations

Finance Minister Nirmala Sitharaman, in her Interim Budget for 2024-25, had raised her hopes for the direct tax kitty for this year, pegging revised estimates at ₹19.5 lakh crore, from the ₹18.23 lakh crore originally estimated for 2023-24.

“We are quite hopeful of meeting the Revised Estimates for the current year, as the asking rate is 17% growth for the next two months. But we don’t know how Advance Tax will come through, so let us see how much we are able to achieve because it is the product of the collections which will be made in the month of February and March and refunds which will be issued,” Central Board of Direct Taxes chairperson Nitin Gupta told The Hindu in an interview last week.

“The provisional figures of direct tax collections continue to register steady growth. Direct tax collections up to February 10, 2024 show that gross collections are at ₹18.38 lakh crore, which is 17.30% higher than the gross collections for the corresponding period of last year,” the Ministry said in a statement.

Rising refunds

“Refunds amounting to ₹2.77 lakh crore have been issued [between] April 1, 2023 [and] February 10, 2024,” it added.

“We are issuing refunds and intend to keep issuing refunds as they arise. So let us see; every year, we are seeing refunds rising. The year before last, it was ₹2.25 lakh crore and last year, it rose to ₹3.07 lakh crore,” Mr. Gupta said, adding that the Board was also trying to process and give quick effect to appellate orders on tax demands, which are likely to pick up in the remaining period of this financial year.

Prior to refunds, gross revenue collections from corporate income tax were 9.2% higher than a year ago, while revenues from personal income tax were up 25.7%. Growth in PIT collections, when combined with the Securities Transaction Tax (STT) receipts, stood at 25.93% at the gross level, while it was 27.2% after making refund adjustments.

As of January 10, the net growth in CIT collections was 12.37%, while PIT revenues, excluding STT receipts, were up 27.26%.

Photo used for representation purpose only.

India is expected to become the third-largest economy in the world with a GDP of $5 trillion in the next three years and touch $7 trillion by 2030 on the back of continued reforms, the Finance Ministry said on January 29.

Ten years ago, India was the 10th largest economy in the world, with a GDP of $1.9 trillion at current market prices.

Today, it is the 5th largest with a GDP of $3.7 trillion (estimate FY24), despite the pandemic and despite inheriting an economy with macro imbalances and a broken financial sector, said the ministry’s January 2024 review of the economy.

“This ten-year journey is marked by several reforms, both substantive and incremental, which have significantly contributed to the country’s economic progress,” it said.

These reforms, it added, have also delivered an economic resilience that the country will need to deal with unanticipated global shocks in the future.

The ministry said that in the next three years, India is expected to become the third-largest economy in the world, with a GDP of $5 trillion.

“The government has, however, set a higher goal of becoming a ‘developed country’ by 2047. With the journey of reforms continuing, this goal is achievable,” it said.

The Nirmala Sitharaman-headed ministry stressed that the reforms will be more purposeful and fruitful with full participation of state governments.

The participation of states will be fuller when reforms encompass changes in governance at the district, block, and village levels, making them citizen-friendly and small business-friendly and in areas such as health, education, land and labour, in which states have a big role to play, it said.

“The strength of the domestic demand has driven the economy to a 7% plus growth rate in the last three years…in FY25, real GDP growth will likely be closer to 7%,” said the review report, and added there is, however, considerable scope for the growth rate to rise well above 7% by 2030.

The review observed that it is eminently possible for the Indian economy to grow in the coming years at a rate above 7% on the strength of the financial sector and other recent and future structural reforms. Only the elevated risk of geopolitical conflicts is an area of concern.

“Furthermore, under a reasonable set of assumptions with respect to the inflation differentials and the exchange rate, India can aspire to become a $7 trillion economy in the next six to seven years (by 2030),” it said.

In the preface of the review report, Chief Economic Adviser V Anantha Nageswaran said the Union government has built infrastructure at a historically unprecedented rate, and it has taken the overall public sector capital investment from ₹5.6 lakh crore in FY15 to ₹18.6 lakh crore in FY24, as per budget estimates.

He noted that the global economy is struggling to maintain its recovery post-Covid because successive shocks have buffeted it. Some of them, such as supply chain disruptions, have returned in 2024.

If they persist, they will impact trade flows, transportation costs, economic output and inflation worldwide, he said.

Economists feel a prolonged conflict in West Asia could push crude oil prices beyond India’s comfort zone.
| Photo Credit: Getty Images/iStockphoto

The story so far: The Indian economy, measured in terms of the Gross Domestic Product (GDP) as well as Gross Value-Added (GVA), grew 7.8% between April and June (first quarter or Q1) this year, a four quarter-high. The Finance Ministry believes the momentum of economic activity was carried forward in the July-September quarter, despite retail inflation hardening to 6.4% from 4.7% in Q1 thanks to a spike in food prices. Growth estimates for Q2 will come in next month, but the Reserve Bank of India (RBI) expects GDP growth to moderate to 6.5%. A week into the second half of the year, the Israel-Palestine conflict erupted and a spate of fresh dark clouds now hover over the economy.

How have experts reacted to recent events?

Economists feel a prolonged conflict in West Asia could push crude oil prices beyond India’s comfort zone and if other countries join the fray, critical sea routes could face disruptions and spike transport and insurance costs. The government may not pass on higher petroleum prices to consumers ahead of critical elections, but producers’ costs may still rise. Airlines, for instance, have been hiking fares in line with aviation turbine fuel costs. Moreover, higher fuel import bills could pose implications on the exchequer as oil marketing companies may need support for under-recoveries. Finance Minister Nirmala Sitharaman, in her first remarks since the strife in Gaza, said it has brought concerns about fuel, food security and supply chains back to the forefront. She flagged concerns about the impact of any disruptions on inflation in the near future. In subsequent comments, she has also emphasised the need to ensure that global food, fertilizer and fuel supplies did not become an “instrument of war and disruption”.

The RBI Governor Shaktikanta Das, who chaired a monetary policy review hours before Hamas launched the first salvo in the conflict, summed up the emerging situation eloquently. “We all thought that the period of uncertainties is over, but as you would have seen in the last fortnight, new uncertainties have been thrown up while some that already existed, like oil prices and volatility in financial markets, have got more pronounced,” he said last Friday. Among the new uncertainties, he listed the spurt in U.S. bond yields that hit a 16-year high this month and mixed global data points amid fears of “higher for longer” interest rates. A cut in India’s interest rate is not on the cards, he emphasised. “Interest rates will remain high… how long… only time and the way the world is evolving, will tell.” Higher interest rates can impact investment flows in markets like India.

Is there a shift in the assessment of risks for the economy?

The International Monetary Fund (IMF) raised its 2023-24 GDP growth estimate for India to 6.3% this month from 6.1% estimated earlier. This is just slightly below the 6.5% GDP uptick the Finance Ministry and the RBI have penned in for this year, following last year’s 7.2% growth. In its monthly economic review report released last month, the Department of Economic Affairs (DEA) in the Finance Ministry said it was comfortable with the 6.5% hopes “with symmetric risks”. Bright spots of corporate profitability, private sector capital formation, bank credit growth and construction sector activity offset the risks at the time. These included steadily climbing crude oil prices (“but no alarms yet”) and an overdue global stock market correction, which it termed “an ever-present risk”. The RBI, this month, also asserted that risks from the uneven monsoon, geopolitical tensions, global market volatility and economic slowdown, were “evenly balanced”. The RBI expects GDP growth to slow to 6% in the current quarter, and further to 5.7% in January to March 2024 before picking up to 6.6% in Q1 of 2024-25. Governor Das has since exuded confidence in the overall macro fundamentals of the Indian economy, despite the uncertainties that have emerged this month.

Last Monday, in its latest economy review, the DEA noted that though domestic fundamentals are strong and improving, downside risks arise from global headwinds that have been compounded by recent developments in the Persian Gulf, and uncertainties in weather conditions due to El Niño effects. “Depending on how the situation develops, crude oil prices may push higher. Further, the relentless supply of U.S. Treasuries and continued restrictive monetary policy in the U.S. (with further monetary policy tightening not ruled out) could cause financial conditions to be restrictive,” it said. It was also prescient about the U.S. stock markets having a greater correction risk, which would have spillover effects on other markets. India’s stock markets clocked six straight days of sharp declines before a marginal recovery was seen this Friday. The DEA has flagged a broader worry about fraught geopolitical conditions triggering a surge in risk aversion. “If these risks worsen and are sustained, they can affect economic activity in other countries, including India,” it noted, even as it averred that India’s growth story remained on track. Inflation had eased to 5% in September from a 15-month high of 7.4% in July and the department highlighted higher upticks in industrial capacity utilisation levels, private consumption and investment, retail loans extended for vehicles and housing as bright spots in its economic outlook. The report also cited ‘optimistic’ findings from RBI’s forwarding-looking surveys on manufacturing, consumer confidence, employment and inflation expectations to stress all is well.

What are domestic factors to watch out for?

Inflation may have subsided last month, but could creep back up. The RBI, which expects average inflation of 5.4% through 2023-24, has penned in a 5.6% average uptick in prices for the October to December quarter and 5.2% for the first six months of 2024. While some vegetable prices have corrected, inflation in onions has shot up while for pulses and some cereals, prices are likely to stay high for a while. The IMF and World Bank expect inflation to average even higher at 5.5% and 5.9%, respectively. The RBI’s preferred 4% inflation mark remains elusive as do prospects of interest rate cuts. This doesn’t bode well for a sustained rise in consumption demand that is vital to revive private investments. A Bank of Baroda study on consumption trends shows that production of readymade garments, mobile phones, hair dye, shampoo, cookers and even ice cream, had declined between 12% to 20% in the first five months of this year. “Normally when inflation is high households tend to cut back on discretionary spending which is what is being seen today,” it noted. With pent-up demand effects fading, the next couple of months will determine whether consumption has actually picked up, the Bank’s economists said. Rural demand which has been lagging, will be important, and may come under more pressure if some crops’ output is affected. Last but not the least, an economist from a rating firm said, the upcoming election season could imply some slowdown in public capex in infrastructure that revved up the economy in recent quarters.

Photo used for representation purpose only.

Growth in India’s gross GST revenues slowed to 10.2% in September from around 10.8% in the previous two months, but collections improved 2.3% over August revenues to touch ₹1,62,712 crore.

Revenues from domestic transactions (including import of services) are 14% higher than the revenues from these sources during the same month last year, and this is the fourth time that the gross GST kitty has crossed ₹1.60 lakh crore mark in 2023-24, the Finance Ministry said.

The revenues included Central GST collections of ₹29,818 crore, State GST of ₹37,657 crore, and Integrated GST of ₹83,623 crore, which included ₹41,145 crore collected on import of goods. GST compensation cess collections were ₹11,613 crore (including ₹881 crore collected on import of goods).

“The government has settled ₹33,736 crore to CGST and ₹27,578 crore to SGST from IGST. The total revenue of Centre and the States in the month of September, 2023 after regular settlement is ₹63,555 crore for CGST and ₹65,235 crore for the SGST,” the Finance Ministry said.

Revenues in strife-torn Manipur, which recovered from a contraction in August, recorded the highest growth among States in September, rising 47%.

GST revenues in Telangana grew 33%, followed by Jammu and Kashmir (32%), Arunachal Pradesh (27%), Tamil Nadu (21%) and Karnataka (20%)

Bihar was the only State to report a contraction in GST collections in September, with revenues down 5%. The Union Territories of Lakshadweep and Andaman and Nicobar Islands clocked a sharp decline in revenues, which fell 45% and 30% year-on-year, respectively. By contrast, revenues shot up 81% in the Union territory of Ladakh.

Revenues from goods imports, which had recovered from two months of contraction to grow 3% in August, slipped back to shrink again in September, albeit by a fraction. While the Finance Ministry didn’t specify the extent of decline in its statement, back-of-the-envelope calculations show GST revenues from goods imports dropped 0.11% from last September.

Image for representation purpose only.
| Photo Credit: Reuters

The Finance Ministry has notified October 1 as the date for implementation of the amended GST law provisions for taxing e-gaming, casinos and horse racing.

According to the changes to the Central GST Act, these supplies will henceforth be treated as “actionable claims” similar to lottery, betting and gambling and subject to 28% Goods and Services Tax (GST) on full face value of bets.

The amendments to Integrated GST (IGST) Act makes it mandatory for offshore online gaming platforms to take registration in India and pay taxes in accordance with domestic law.

In its meetings in July and August, the GST Council, comprising finance ministers of Centre and states, had approved amendments to the law to include online gaming, casinos and horse racing as taxable actionable claims, and clarified that such supplies would attract 28% tax on full bet value.

Parliament last month passed amendments to the Central GST and Integrated GST laws to give effect to the Council’s decision.

Also Read | A tentative rethink: On the Goods and Services Tax Council’s move 

The Finance Ministry has now notified that October 1 will be the appointed date for implementation of these provisions.

The GST Council in its meeting in August had decided that the amended provision to classify these supplies as actionable claims and clarifying the taxation provisions would come into effect from October 1.

A review of the implementation was proposed to be carried out after six months, which is April 2024.

Finance Ministry exuded confidence that the country will achieve 6.5% growth in FY24 on the back of improved corporate profitability, private capital formation and bank credit growth, notwithstanding the risks of rising crude oil prices and monsoon deficit.

The Finance Ministry on September 22 exuded confidence that the country will achieve 6.5% growth in FY24 on the back of improved corporate profitability, private capital formation and bank credit growth, notwithstanding the risks of rising crude oil prices and monsoon deficit.

The ministry’s August edition of Monthly Economic Review said the 7.8% growth recorded in the first quarter (April-June) was on account of strong domestic demand, consumption and investment. The growth was also witnessed in various high-frequency indicators.

Flagging certain risks like steadily climbing crude oil prices in the global market, impact of monsoon deficit in August on Kharif and Rabi crops, the review said, “that needs to be assessed.” At the same time, it observed, the rains in September have erased a portion of the rainfall deficit at the end of August.

Furthermore, the review said, a stock market correction, in the wake of an overdue global stock market correction, is an ever present risk, and offsetting these risks are the bright spots of corporate profitability, private sector capital formation, bank credit growth and activity in the construction sector.

“In sum, we remain comfortable with our 6.5% real GDP growth estimate for FY24 with symmetric risks,” it said.

Observing that the strength of domestic investment is the result of the government’s continued emphasis on capital expenditure, the report said, measures implemented by the central government have also incentivised states to increase their capex spending.

The external demand has further complemented the domestic growth stimulus, it said, adding, the contribution of net exports to GDP growth has increased in Q1FY24, as services exports have performed well.

High Frequency Indicators (HFIs) for July/August 2023 reflect sustenance of growth momentum in Q2FY24, it said.

With regard to the banking sector, it said, a variety of indicators suggest increasing resilience of the sector through declining Non-Performing Assets (NPA), improving Capital to Risk-weighted Asset Ratio (CRAR), rising Return on Assets (RoA) and Return on Equity (RoE) as of March 2023.

Similarly, as of March 2023, data for Non-Banking Finance Companies (NBFCs) indicated improvements in their profitability and risk-taking behaviour, it said.

Further, it said, as per the July 2023 estimates by the RBI, there has been a consistent and broad-based growth in the non-food bank credit of Scheduled Commercial Banks (SCBs) since April 2022.

On retail inflation, the report said, it decreased in August, with both core inflation and food inflation easing from the July figure.

The calibrated measures taken by the government, including adjustments in the duties of many critical inputs and monetary policy tightening, helped reduce core inflation to a 40-month low level. Globally, food inflation remains high in many major economies, it said.

In India, it said, consumer food price inflation eased to 9.9 per cent in August due to the government intervention with targeted measures for specific crops, including build-up of buffer, procurement from producing centres and subsidised distribution.

New Delhi:

 The Ministry of Finance on Monday approved a series of welfare measures for the benefit of Life Insurance Corporation of India (LIC) agents and employees according to a release from the Ministry.

The ministry decided to enhance the gratuity limit from Rs 3 lakh to Rs 5 lakh for LIC agents, aiming to bring substantial improvements to the working conditions and benefits of those individuals.

The term insurance cover for the agents has been expanded from the existing range of Rs 3,000-10,000 rupees to Rs 25,000-150,000.

This enhancement in term insurance is expected to significantly benefit the families of deceased agents.

Also, a family pension at a uniform rate of 30 per cent for the welfare of the families of LIC employees has been decided upon.

“More than 13 lakhs agents and more than 1 lakh regular employees, who play a pivotal role in the growth of LIC and deepening of insurance penetration in India, will benefit from these welfare measures,” the finance ministry said.

(Except for the headline, this story has not been edited by NDTV staff and is published from a syndicated feed.)