~Ritesh and Shrishti Sharma
As the curtains fall on the year 2023, India finds itself at a pivotal juncture, on the brink of the upcoming Lok Sabha polls. Amidst the political fervour, the nation’s attention has now shifted to the heart of economic discussions – the impending Union Budget. The quest for answers regarding our trajectory toward achieving the ambitious 4.9% Fiscal Deficit target and the anticipated surge in infrastructure spending hangs in the balance, awaiting revelation on February 1st, 2024.
Here is a nuanced review of India’s economic landscape in the crucial month of December 2023, providing insights that serve as a compass for the nation’s economic course in the imminent future.
Goods and Services Tax
In December 2023, India’s Goods and Services Tax (GST) collections reached an impressive ₹1,64,882 crore. This marks the seventh consecutive month with collections exceeding ₹1.60 lakh crore. The components include CGST at ₹30,443 crore, SGST at ₹37,935 crore, IGST at ₹84,255 crore (including ₹41,534 crore from goods import), and cess at ₹12,249 crore (including ₹1,079 crore from goods import).
Notably, during April-December 2023, GST collections witnessed a robust 12% year-on-year growth, totaling ₹14.97 lakh crore, compared to ₹13.40 lakh crore in the same period of the previous year.
Additionally, Lakshadweep saw a remarkable 310% increase in GST revenue in December 2023 compared to the same month in 2022.
Source: PIB
Inflation
India’s headline retail inflation rate, as measured by y-o-y changes in the all-India consumer price index (CPI), surged to 5.69 per cent in the month of December, as per the data released by the Ministry of Statistics and Programme Implementation.
In November, the Consumer Price Index (CPI) inflation was 5.55 per cent. The food inflation rose to 9.53 per cent in December as compared to 8.7 per cent of November.
The rise in food prices is responsible for the growth in inflation. The veg food prices saw a slow momentum in the price contraction. However, the retail inflation remained within the tolerance range of 2 to 6 per cent set by the RBI, albeit in its upper end.
Unemployment
The unemployment rate in India, for individuals aged 15 and above, slightly improved to 8.7% in December 2023 from 8.9% in the previous month. However, this follows a trend of persistently high unemployment, with rates averaging around 8.1% in the first 11 months of 2023. Despite the marginal decrease, it appears that an unemployment rate of 8-9% has become the new normal in India.
Source: CMIE
Purchasing Manager’s Index
India’s manufacturing sector concluded 2023 on a somewhat cautious note, with factory growth decelerating to an eighteen-month low in December. The HSBC India Manufacturing Purchasing Managers’ Index fell to 54.9 from November’s 56.0. While this indicates a slower rise in new orders and output, it still remains above the 50-mark, signifying growth for the 30th consecutive month.
Industrial Production
Since, the statistics for the month of December 2023 will be released in February, as per the latest data for industrial production released by the Ministry of Statistics & Programme Implementation, the Quick Estimates of India’s Index of Industrial Production (IIP) with base 2011-12 stands at 141.0 in November.
The Indices of Industrial Production for the Mining, Manufacturing and Electricity sectors for the month of November 2023 stand at 131.1, 139.2 and 176.3 respectively.
As per Use-based classification, the indices stand at 143.8 for Primary Goods, 98.0 for Capital Goods, 151.4 for Intermediate Goods and 164.1 for Infrastructure/ Construction Goods for the month of November 2023.
Furthermore, the indices for Consumer durables and Consumer non-durables stand at 105.9 and 156.9 respectively.
Trade Merchandise
India’s merchandise exports in December 2023 registered 0.96 per cent growth at $38.45 bn over $38.08 bn in December 2022, as per the Ministry of Commerce and Industry.
The merchandise imports were $58.25 bn, in comparison to December 2022’s $61.22 bn.
India’s trade deficit during April-December improved by 35.87 per cent from USD 108.13 billion in 2022 to $69.34 bn in 2023. The merchandise trade deficit also improved by 11.45 per cent from $212.34 bn in April-December 2022 to $188.02 bn in April-December 2023.
Major contributors to export growth include Engineering Goods, Iron Ore, Gems & Jewellery, Electronic Goods and Drugs & Pharmaceuticals.
FII DII Data
For the month of December, the foreign portfolio investors (FPIs) poured in Rs 66,134 crore in the equity markets and Rs 18,302 crore in the debt segment, taking the total investments to a massive figure of Rs 84,537 crore in the Indian stock market, as per the data from the National Securities Depository Limited (NSDL).
The domestic institutional investors’ (DIIs) net purchase/sell statistic stood at Rs 12,942 crores, as per the National Stock Exchange data, reported by MoneyControl.
The Indian share market observed extraordinary highs in the month of December. On the backdrop of unexpected gross domestic product (GDP) numbers and consistent stance of the RBI monetary policy committee (MPC), the investors responded in tandem with them.
The Bombay Stock Exchange index Sensex scaled a record high of 72,119.85 and the National Stock Exchange index touched the all-time peak of 21,801 points in the last week of the month. However, the markets closed declining marginally due to profit recovery on the last trading day for the calendar year.
UPI Transactions
In November, the Unified Payments Interface (UPI) reported a significant surge in transactions. With 522 active banks, UPI witnessed 12,020.23 million transactions, amounting to Rs. 18,22,949.42 crore, according to the National Payments Corporation of India (NPCI). This notable increase in transaction values further underscores the growing prominence of digital payments in the country.
Foreign Exchange Reserves
India’s foreign exchange reserves saw a seven week streak as it witnessed an increase of $2.75 billion for the week ending December 29, 2023, as per the data released by RBI on January 5, 2024.
The total forex reserves rising to a 22-month high reached $623.20 billion. According to the Weekly Statistical Supplement released by the Reserve Bank, the foreign currency assets (FCAs) saw an increase of $1.86 billion to reach $551.61 bn.
The gold reserves expanded by $853 million to reach a total of $48.32 bn, while the special drawing rights (SDRs) grew by $38 mn to reach $18.36 bn.
From November to December, the forex reserves shot up by $19.16 when it closed at $604.04 bn as of December 1, 2023.
The reason for the healthy increase in the FX reserves is due to the central bank’s intervention in through liquidity management to mitigate extreme volatility in the Rupee’s price against the US Dollar. The Indian currency closed at 83.15 on Friday, December 29, 2023.
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