Taking a look at some high-frequency indicators for January-February

CEA V Anantha Nageswaran had said that to get to 7 percent GDP growth in FY23, the January-March quarter will have to register a 5.1% real GDP growth

When the October-December quarter official gross domestic product (GDP) growth figures came in at 4.4 per cent – below market expectations – it cast some doubts over whether the economy would grow at 7 per cent in the current financial year (FY23), which was the official advance estimate by the National Statistical Office.

Chief Economic Advisor V Anantha Nageswaran had said that to get to 7 per cent GDP growth in FY23, the January-March quarter (Q4) will have to register a 5.1 per cent real GDP growth. “Even if we get 4.4 per cent in Q4, the same as Q3, the growth for FY23 will be 6.8 per cent, which is well within the statistical margin of error,” he had said.

Nageswaran had also argued that the October-December (Q3) headline print would be revised upwards as many high-frequency indicators had shown strong year-on-year growth. Business Standard had, in an earlier piece, taken a look at some of the high-frequency indicators to show that while the urban-focused indicators for that quarter had indeed shown strong growth, the same was not the case of rural-indicators like tractor and two-wheeler sales and rural wages.

With data available for January and February for some of the high-frequency indicators, we put them through the same smell test. In all of this, one has to remember that February is the shortest month of the year.

Goods and Service Tax

The biggest indicator of improved economic activity since the pandemic has been the increase in GST monthly collection, which has been above the Rs 1.4 trillion mark each month in the current financial year (FY23). The same was true for January and February.

The collection of GST slipped below the Rs 1.5-trillion mark in February, a month after touching the second-highest figure. The mop-up of Rs 1.49 trillion in February is 5.1 per cent lower than the figure achieved in the previous month. In January, the GST mop-up stood at Rs 1.57 trillion, the second highest after Rs 1.68 trillion in April of the current fiscal year. However, the latest figure is 12.4 per cent higher than Rs 1.33 trillion a year ago.

Not all of the year-on-year increase in the chart is due to improved economic activity though, with better compliance and assessment also playing a part.

Vehicle sales

There is one data set here that is urban-focused (car sales), and two which are indicative of rural consumption (two-wheelers and tractors). Many analysts have argued that the current consumption demand is skewed towards goods and services consumed largely by households falling in the upper-income bracket.

The strong sales in four-wheeler sales and much weaker year-on-year growth in two-wheeler sales show that there could be some truth to that. However, tractor sales also grew strongly year-on-year, though one has to remember that January and February are not harvesting or sowing months.

Airlines

This is another high-frequency indicator that is biased towards the urban population and those with higher disposable incomes. This data captures the extent of pent-up demand in the aviation, travel and tourism sectors, as restrictions were lifted. One thing to note is the astonishing rise in passengers carried for the month of January, compared with the same period last year. The December 2022-January 2023 holiday period was the first one without travelling restrictions since the pandemic.

Railways

This is another indicator that showed the strong recovery in economic activity once the Covid restrictions were largely lifted. Like the airline charts, this chart also shows that year-on-year growth for January was much higher than in February, although railways are more rural-focused.