Economists are skeptical amongst signs of recovery. GST collections are symbolic of economic activities within the economy. Since September’20 GST collections have been highest in last 7 months, and also 4% higher than September’19 figure, it only indicates that the economy of India is back to pre-Covid level. But several economists are raising concerns about eagerness of government media & analysts to prove that the situation is all rosy.
1. All companies whose turnover is less than Rs 5 Crores were given last date to deposit GST Return in September. The larger ones had to deposit it by June. Hence there was a lump in June, and also a lump in September.
2. If all economist agree that next 3 quarters are going to see a negative GDP, is there a logic in assuming that economic activity is back to normal? Even if we go back to pre-Covid level, it should not be considered normal. Actual normal is when we see a growth of 4% to 5%. Anything else if abnormal.
3. Vivek Kaul writes on his blog that the Automobile sales numbers are falling well short of vehicles being registered by authorities. This could be due to inventory build up at the Dealer level, and not real purchases by consumers.
4. The RBI report suggests that the overall credit growth has been negative during Pandemic period. This shows that the consumers and business houses are less confident of spending extra at present juncture.
5. Consumer Sentiment Index (source RBI / Tradingeconomics.com) is at an all time low till the latest figure published for July’20. The COVID19 infections are still elevated and a large section of population is still staying indoors (especially the very young and very old). It would be a miracle if the consumer sentiment index comes back to pre-Covid level in last 2 months.
6. As per CMIE, nearly 2.1 Crore salaried jobs have been lost during last 6 months. This generally should prevent any over enthusiasm in calling it return to normalcy. The EPFO data throws another interesting number. During last 7 months, salaried class has withdrawn nearly Rs 39400 Crores from EPFO accounts. To put this into perspective, this is nearly 30% of annual increment to EPFO account. No doubt, a major portion is withdrawn by those who went jobless so as to meet their daily and emergency needs. Without creation of new jobs, how would they continue to consume is a question mark !
Eventually, India would come back to growth path. But, we think, that time is still some distance away !