After fall season in Sept, all eyes on festive lights

New Delhi: The Indian economy may have slowed marginally halfway through the fiscal year after a strong summer, based on data released Tuesday, but experts said this could be a blip and the festival season is likely to lift sentiment, shoring up growth.

Goods and services tax ( GST) collections rose a muted 6.5% in September to ₹1.72 lakh crore, slowing from the double-digit rise recorded in the April-August period, data released Tuesday showed.

Manufacturing activity as measured by the Purchasing Managers' Index (PMI) slipped to an eight-month low of 56.5 in September.


Domestic car sales declined for the third straight month in September despite automakers offering hefty discounts to boost demand. As per industry estimates, 355,000-360,000 cars, sedans and utility vehicles were sold in September, 1-2.5% down from 364,000 in the year-ago month. India's power consumption in September rose 0.6% year-on-year to 141.4 billion units.

"Momentum in India's manufacturing sector softened in September from the very strong growth in the summer months," said Pranjul Bhandari, chief India economist, HSBC.

The output of eight core infrastructure industries contracted 1.8% in August, the first decline in around four years, data released Monday showed.

Key Positives
Economists said the softness is likely temporary and expect a favourable monsoon and the upcoming festive season to provide a boost.

"Consumption is likely to rise in the second half of the current financial year... One sector poised for strong performance is consumer goods," said Bank of Baroda chief economist Madan Sabnavis, adding that spending in rural areas is expected to drive this. "We are on the path to achieve a growth rate of over 7%."

The June-September monsoon season ended with the country getting 7.6% more rainfall than normal, the India Meteorological Department (IMD) said on Tuesday. Heavier-than-usual rain may have also dented economic activity. "Lower growth in GST collections in September could reflect the impact of heavy rainfall on activity in various sectors, similar to the impact seen on the core sectors," said Icra chief economist Aditi Nayar. "We need to watch the trend in revenue collections in the festive season, when volumes are expected to rise."

Economic performance in FY25 has been robust thus far, with demand drivers getting broad-based as reflected in the strong growth of consumption and investment, said Paras Jasrai, senior economic analyst at India Ratings and Research.

"Although PV (passenger vehicle) sales are down, two-wheeler sales have been good, so has been the trading activity with e-way bills touching record highs," Jasrai said. "States are also expected to step up with their capex spend."

Announcements of fresh investment have risen from the first quarter, during which India's general elections were being conducted, based on Centre for Monitoring Indian Economy (CMIE) data, Sabnavis said. After the elections got over, private sector investment intentions have turned positive, he said. A pickup in the Centre's spending after the general elections is also expected to provide support.

Manufacturing Softness

While the expansion in factory activity is above the long-run average, September PMI at 56.5 was lower than 58.2 recorded in the first quarter of the current financial year. The average reading for the second quarter was 57.4. Numbers above 50 indicate expansion while those below signify contraction.

Employment generation declined in September, "reflecting a reduction in the number of part-time and temporary workers at some firms", the PMI report noted. "Output and new orders grew at a slower pace, and the deceleration in export demand growth was especially evident as the new export orders PMI was the lowest since March 2023."

Slower GST Collections

Of the total collection, central GST stood at ₹28,775 crore, state GST at ₹36,037 crore, integrated GST at ₹76,461 crore and cess at ₹11,509 crore. The GST collection net of refunds stood at ₹1.52 lakh crore, up 3.9%. The gross GST collection for the first half of this fiscal year (April-September) stood at ₹10.87 lakh crore, up 9.5% from the same period last year.