'Economy sustained its growth momentum first four months in Q1 FY25': Monthly review by Finance Ministry

The Union Finance Ministry in its monthly economic review stated that the Indian economy has sustained its momentum in the first four months of FY25, i.e. April, May, June and July. The report noted that the resilience of domestic activity is also reflected in the strong performance of the manufacturing and services sector purchasing managers’ indices. The manufacturing growth has been driven by expansion in demand conditions, a rise in new export orders and growth in output prices.

RBI’s Order Books, Inventories, and Capacity Utilisation Survey (OBICUS) highlighted expansion in capacity utilisation in the manufacturing sector. Expansion in sales and increase in new order uptakes have led to the robust performance of the services sector. The contact-intensive services sector has been a major performer driven by an upswing in the tourism and hotel industry. 

The report further said GST collections in the first four months of FY25 underwent a level shift pushed up by the widening of the tax base and heightened economic activity. The double-digit growth in e-way bill generation reflects sustained economic activity. This is expected to result in higher GST collections in the coming months.

In July 2024, e-way bill generation signalled a rise in economic activity. The YoY increase in e-way bills reached a nine-month peak of 19.2 per cent. The total number of e-way bills issued that month surged to 10.5 crore, setting a new single-month record. Additionally, there was a month-on-month (MoM) rise of 4.7 per cent in e-way bill generation. During FY24 (April-July), it grew by over 16.8 per cent compared to the same period last year. This ongoing growth reflects sustained economic activity and industry engagement, which is expected to result in higher GST collections in the coming months.

"This growth is reinforced by a double-digit rise in e-way bill generation, indicating sustained economic momentum. Manufacturing and services sectors have also shown strong performance, driven by robust demand and expanding capacity utilization, with upcoming measures in the FY25 Union Budget expected to bolster these sectors further," the report noted.

On the fiscal front, the Union Budget FY25 has laid out a glide path of fiscal consolidation. Supported by strong revenue collection, discipline in revenue expenditure, and robust economic performance, the fiscal deficit is projected to decline. At the same time, capital expenditure is maintained at high levels, supporting the fledgling private investment cycle.

Stock Market

The report noted the Indian stock market witnessed another bullish run as both the Nifty 50 and BSE Sensex 30 indices soared to new heights. In July 2024, the Nifty 50 opened with a record high of 23993 on July 1, 2024, ultimately surging to an all-time peak of 24999.8 on July 29, 2024. Similarly, the BSE Sensex commenced trading with a high of 79043.4, reaching an unprecedented high of 81908.4 on 29th July 2024.

Inflationary pressures

The report noted retail inflation eased in July 2024. The retail inflation based on Consumer Price Index-Combined (CPI-C) eased from 5.1 per cent in June 2024 to 3.5 per cent in July 2024, the lowest since September 2019. 

This was mainly due to a significant fall in food inflation. It declined to 5.4 per cent in July 2024 from 9.4 per cent in June 2024. The substantial fall witnessed in food inflation was helped majorly by a decline in vegetable inflation from 29.3 per cent in June 2024 to 6.8 per cent in July 2024 and mild deflation in ‘oils and fats’ and spices. 

On the other hand, core inflation (non-food, non-fuel) was at a moderate level of 3.3 per cent in July 2024. Overall, the retail inflation rate moderated to 4.6 per cent in the first four months of FY25 as compared to 5.3 per cent in FY24 (April-July).