The past week’s economic data delivers a sobering message to the Finance Ministry and the Reserve Bank of India (RBI), complicating their aspirations for a robust growth rebound in the latter half of 2024-25. GDP growth has tapered to 5.4` in the second quarter, prompting reassurances that it is merely a transient dip. However, the slowdown in consumption demand, exacerbated by restrained urban spending, raises serious questions about the depth of recovery expected in the October-December quarter. While policymakers hope for a festive-season boost and resilient rural demand, the latest data paints a less optimistic picture.
Bank credit growth has decelerated for the fifth consecutive month in November, casting a shadow over investment and consumption prospects. Meanwhile, core infrastructure sectors, despite recording a four-month high expansion of 4.3 per cent, reported production levels 3.3 per cent below October’s output, with six of eight sectors operating below capacity. The Purchasing Managers’ Index reveals factory activity has slumped to its worst levels in 2024, compounded by rising input costs that threaten to stifle demand further.
Adding to these challenges are dismal Goods and Services Tax (GST) receipts for December, which stood at a three-month low of ₹1.77 lakh crore. With year-to-date revenue growth at just 8.6 per cent, meeting the 11 per cent growth target set in the Union Budget appears increasingly unlikely. Particularly concerning are sluggish revenue upticks in major consumer states such as Uttar Pradesh (1 per cent) and Gujarat (4 per cent), alongside contractions in Andhra Pradesh and northeastern states.
As the government prepares the Union Budget for 2025-26, it must scrutinize these indicators and address the underlying pain points. High inflation, tightening credit flows, and uneven consumption trends need targeted interventions to reinvigorate growth and ensure economic momentum is sustained across regions and sectors. Bold, well-calibrated measures are imperative for turning the tide.
