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Economic Highlights
New
Delhi, 20 November 2023
Record Diwali Sales
EXPORTS TO GERMANY RISE
By Shivaji Sarkar
India’s
imports are growing, exports are slowing but domestic sales during Deepavali
touched a record Rs 3.75 trillion, according to the Confederation of
Association of Traders (CAIT). Besides, with some more regional festivities such
as chhathpuja it may add another Rs 50000 crore sales. The All-India Jewellers
and Goldsmiths Federation National says that on Dhanteras, about 41
tonnes of gold and about 400 tonnes of silver jewellery and coins were
sold in the country. In value terms, the total turnover of gold, silver and
other items was Rs 30,000 crore.
Even passenger
vehicle sales have gone up by about 21 percent on the back of deregistration of
fine working personal cars though these don’t add to pollution. Maruti alone is
stated to have sold over 55,000 vehicles. So did the tractors, suggesting a new-look
agriculture.This is despite the rising food prices, posing threat to the Reserve
Bank of India’s (RBI) commitment to align headline inflation with the 4 percent
target as state in its‘State of the Economy’ report.
Rising
food prices pose the sole threat to the RBI’s commitment to align headline
inflation with the 4 per cent target, according to the central bank’s report.
One particular aspectwhich is troublesome is the vegetable inflation averaging
5.7 percent from fiscal year 2020 till now (2023) compared to a virtual zero
between 2016 to 2019. Occasional rises have been much higher.
While
this phenomenon along with some external developments are pushing the rupee
down vis a vis the dollar, it has added to another problem of shrinking goods
exports for the seventh time in August while imports surged to hit the highest
level since March this year. At $58.6 billion imports were 5.2 percent below
last year’s level but exports fell higher by 6.9 percent leading to $24.2
billion trade deficit, the widest since October 2022. In September, imports at
$68.75 billion, less than $79.64 billion a year back and were again higher than
exports at $ 63.84 billion against $64.61 billion the previous year.
But
India may be doing better in individual country terms. A German government
report says, a rapidly growing India became more important for Germany. Goods
to the value of 8.7 billion euros, 1.7 percent higher were imported from India
to Germany from January to July 2023. Accounting for 1.1 percent of total
imports, India ranked 23rd among Germany’s major suppliers of goods.
Among the non-EU countries, India ranked ninth.
Goods
exports are down 11.9 percent and imports dipped by 12.1 percent. In short, it
affects foreign currency earning, which remains at a level of Rs 83 or below.
This makes imports more expensive and that pushes up the inflation RBI
struggles to keep in check.
Services
exports and imports too were hit. In September, services exports witnessed a
year-on-year decline of 2.7 percent at $ 28.42 billion, Simultaneously,
services imports decreased by a sharper 10.3 percent at $ 14.59 billion. This
is an indication of the economy at the domestic front. It means the overall
activities in the economic sector is coming down. Shrinking services exports
imply that their ability to bridge the goods trade deficits that were
significant last year, will be restricted. This could lead to wider current
account deficits.
It can
impinge on the budgetary process that begins at this point of time. This will
be significant for an election year provisional central budget. The 2023-24
budget allocated, like the previous year, higher infrastructure expenditure
hoping faster growth. It will be challenging for the economy. Not all expenses
may be justified like demolitions of many office buildings, which could have
stood the test of time. World over traditionally such buildings are refurbished
and maintained instead of demolitions. Iconic structures like the National
Museum are also being axed. These add antiquity value to historic cities.
It
appears that the domestic purchasers would be greasing the economy instead of
external sales. This year’s domestic figure at Rs 3.75 trillion is far higher
that the retail business of Deepavali 2022 at Rs 1.5 trillion. Gold sales
spiked by 20 percent almost like the last year.
The
peculiar factors of the economy need to be decoded. Festivity sales are rising
every year despite the rise in inflation and moderate job scenario. This year
overall many farmers dealing in potato and other vegetables had less income
even as onion, tomatoes, cereals, and pulses prices surged. The RBI is watching
keenly the November and December market trends.
Despite
inflationary situation the rise of sales of goods and commodities suggest that
even the not so affluent keep the wheels of economy moving. Festive sales are
seasonal but whether such trends would sustain the economy or not is yet to be
proven. This definitely gives a boost to the entire economic sector, including
travel, transport and hotels. Large movements generate enormous opportunities.
An
increase in inflation rate leads to a decrease in the household consumption as
per the traditional theory. How the festive sales surge remains to be unfolded.
The credit card sales have also gone up 17 percent in October and a bit more in
November. Overall estimates show credit card sales of Rs 29,000 crore. There is
a catch. It may be part of the total purchases by the consumers. But the sales
surge also has another blue. It has been observed that credit card defaults too
increased.
It has
been observed that from around 70 percent as a share of GDP, the share of
private consumption expenditure (PFCE) has gone down to 58.5 percent. Aniket
Dani, director, research, CRISIL Market Intelligence says the self-employed
witnessed degrowth of 3 percent in their income during the last one year.
Inflation during this period remained at 6 percent, suggesting loss in income.
The low-income group bore the brunt.
The
growth in sales may not encompass all sections. At the macro level slowdown is
evident. Chief Economist, Motiwal Oswal Financial Services Nikhil Gupta says
that when saving continue to fall, income growth lags consumption growth. So,
all that glitters may not be gold. Diwali sales may have boosted a large part
of the market but its general impact on the economy is yet to be observed.---INFA
(Copyright, India News & Feature Alliance)
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