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Economic indicators are the measures of macroeconomic performance. These indicators can give an outlook of how an economy is functioning. In the recent episode of businessline’s State of the Economy podcast, Shishir Sinha speaks to Rahul Ahluwalia, Co-Founder, Foundation for Economic Development, on thw key macroeconomic trends and high-frequency economic indicators.
Sinha highlights the recent GST collection of ₹1.82 lakh crore, a three-month high, noting that collections from imports are higher than domestic sources. Ahluwalia emphasies that imports shouldn’t be feared, as they are essential for exports. He stresses that the real concern is the stagnant growth of exports. Before 2011, the Compound Annual Growth Rate (CAGR) of exports was about 10%, but it has been flat at around 3.5% over the past 14 years. He believes that exports drive economic growth, and the current trend indicates a need to focus on boosting export performance.
Regarding GST, he mentions that while increasing collections might seem positive, it could also indicate a shift from the informal to the formal sector, without real economic growth. He cautions that the growth in GST collections should not be viewed solely as an economic improvement but should consider the underlying factors.
Ahluwalia correlates the rise in GST collections with high inflation in the manufacturing sector. He expects retail inflation to be around 4 to 5 per cent, aligning with the Reserve Bank of India’s target. He notes that controlling inflation through high-interest rates can make investments less attractive.
He added that the first quarter fiscal deficit is 8.1 per cent of the budget estimate, partly due to limited expenditure during the election period. Ahluwalia argues that it is unlikely for the fiscal deficit to be lower than the 4.9 per cent estimate, as most of the budget is pre-committed to salaries and debt servicing. Additionally, post-election uncertainties and coalition demands may lead to further spending, complicating efforts to meet the capital expenditure target of ₹11 lakh crore for the fiscal year.
Listen in to the podcast.
(Host: Shishir Sinha; Producer: Anjana PV)
About the State of the Economy podcast
India’s economy has been hailed as a bright spot amid the general gloom that seems to have enveloped the rest of the world. But several sectors continue to stutter even as others seem set to fire on all cylinders. To help you make sense of the bundle of contradictions that the country is, businessline brings you podcasts with experts ranging from finance and marketing to technology and start-ups
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