State of the Economy : Jun 24

State of the Economy:

How macroeconomic indicators performed in June 2024? Retail Inflation and Wholesale Price Inflation increased to 5.08 per cent and 3.36 percent respectively snapping months long record; Unemployment rose to 8-month high at 9.2 per cent. Industrial production grew 5.9 per cent, UPI transactions saw a dip, while FPIs witnessed net inflows in June 2024. Read here for the detailed analysis: n June 2024, the Reserve Bank of India announced its bi-monthly monetary policy review, maintaining the repo rate at 6.5 per cent to manage inflation while supporting economic growth. Concurrently, the Ministry of Statistics and Programme Implementation (MoSPI) released GDP growth figures for Q1 FY25, showing 7.2 per cent year-on-year growth.

However, the Bombay Stock Exchange (BSE) Sensex and the National Stock Exchange (NSE) Nifty indices showed mixed performance throughout June. Technology and pharmaceutical stocks led gains, while banking and real estate sectors faced selling pressure due to regulatory concerns and profit-booking. Two key data figures in June 2024 caught significant attention: Retail inflation broke a five-month record of moderation, increasing to 5.08 per cent, with food inflation marking another high at 9.36 per cent. At the same time, unemployment increased to 9.2 per cent. Despite these challenges, there was optimism from international organizations, with the IMF raising India’s growth projections to 7 per cent and the Asian Development Bank maintaining its forecast at 7 per cent.

Here is a detailed analysis of the high-frequency indicators of the Indian economy for June.

Inflation

The annual inflation rate based on the all-India Consumer Price Index (CPI) snaps five month record of moderation and increases to 5.08% in June 2024, up from 4.75% in May. This rate varied between rural (5.66%) and urban (4.39%) areas.

According to the Ministry of Statistics and Programme Implementation, The Consumer Food Price Index (CFPI), which measures changes in food prices, shows a significant increase with a combined inflation rate of 9.36%. The rural CFPI is at 9.15%, while the urban CFPI is slightly higher at 9.55%. Notably, inflation for sub-groups like 'Eggs', 'Spices', 'Meat & Fish', and 'Pulses & Products' has decreased compared to May 2024.

The annual rate of inflation based on all India Wholesale Price Index (WPI) number is 3.36%.

Unexpected and prolonged heatwaves have driven food prices up across many parts of India, potentially creating challenges for policymakers.

Inflation Rates (Jan-Jun 2024) Month

CPI (%)

WPI(%) Provisional

January 2024

5.10

0.27

February 2024 5.09 0.20

March 2024 4.85 0.53

April 2024 4.83 1.2

May 2024 4.75 2.61

June 2024 5.08 3.36

Unemployment

In June 2024, India's unemployment rate experienced a sharp increase, reaching 9.2 per cent from 7 per cent in May, as reported by CMIE’s Consumer Pyramids Household Survey. Both urban and rural areas saw rises in unemployment, with rural unemployment jumping from 6.3 per cent to 9.3 per cent and urban unemployment edging up from 8.6 per cent to 8.9 per cent.

This surge in unemployment coincided with a rise in the labour participation rate (LPR), which increased to 41.4 per cent from 40.8 per cent the previous month, and a decline in the employment rate, which dropped from 38 per cent to 37.6 per cent.

Unemployment Rates (Jan-Jun 2024)

Month Unemployment Rate January 2024 6.8

February 2024 8

March 2024 7.6

April 2024 8.1

May 2024 7

June 2024 9.2

Purchasing Manager’s Index (Manufacturing and Services)

In June 2024, the Indian manufacturing sector demonstrated growth, with the HSBC India Manufacturing PMI rising to 58.3 from 57.5 in May. This marked a sharp improvement in business conditions, driven by strong demand that boosted new orders and output.

Consequently, firms increased their hiring at the fastest pace recorded in over 19 years. Input cost pressures eased slightly from May, yet remained elevated, leading manufacturers to raise selling prices significantly.

Similarly, the Indian services sector exhibited robust growth, with the HSBC India Services PMI climbing to 60.5 from 60.2 in May. This increase was driven by a sharp rise in new business and an unprecedented surge in international sales.

The sector saw the fastest pace of job creation since August 2022, as firms hired both short-term and permanent staff to meet the growing demand. Input cost pressures remained moderate, with a slight increase in selling prices. Despite some concerns about market competition, service providers remained optimistic about future business prospects

Month

PMI (Manufacturing) PMI (Services) March 2024 59.1 61.2

April 2024 58.8 60.8

May 2024 57.5 60.2

June 2024 58.3 60.5

India’s Index for Industrial Production

The Index of Industrial Production (IIP) for May 2024, released in June, indicated a growth rate of 5.9 per cent year-on-year.

The Quick Estimates of IIP with base 2011-12 stands at 154.2 against 145.6 in June 2023. The Indices of Industrial Production for the Mining, Manufacturing and Electricity sectors for the month of May 2024 stand at 136.5, 149.7 and 229.3 respectively.

Within the manufacturing sector, the growth rate of the top three positive contributors to the growth of IIP for the month of April 2024 are – “Manufacture of basic metals” (7.8%), “Manufacture of pharmaceuticals, medicinal chemical and botanical products” (7.5%), and “Manufacture of electrical equipment” (14.7%).

Sector Growth Rate (%) Mining 6.6

Manufacturing 4.6

Electricity 13.7

Trade Merchandise

Total exports increased by 2.55 per cent year-on-year, reaching USD 35.20 billion compared to USD 34.32 billion in June 2023. The cumulative exports for April-June 2024 stood at USD 109.96 billion, marking an 8.60 per cent growth from the same period last year.

Non-petroleum and non-gems & jewellery sectors were particularly strong, growing by 8.48 per cent to USD 27.43 billion in June 2024. Key drivers of this growth included significant expansions in engineering goods, electronic goods, drugs & pharmaceuticals, coffee, and organic & inorganic chemicals.

Engineering goods saw a notable increase of 10.27 per cent, reaching USD 9.39 billion, while electronic goods surged by 16.91 per cent to USD 2.82 billion. The pharmaceutical sector also showed robust growth, with exports up by 9.93 per cent to USD 2.47 billion. Moreover, coffee exports soared by an impressive 70.02 per cent, reaching USD 0.20 billion, indicating diversified strength across multiple export segments in June 2024.

Merchandise Export Growth Drivers (May 2024) Category Growth (%) May 2024 (USD Billion) Electronic Goods 16.91 2.82

Engineering Goods 10.27 9.39

Drugs & Pharmaceuticals 9.93 2.47

FII and DII Statistics

Foreign portfolio investors (FPIs) recorded net inflows of Rs. 41,157 crore in May 2024. Conversely, domestic institutional investors (DIIs) reported net investments of Rs. 28,633.15 crore. The equity markets ended the month with the NSE Nifty 50 and the BSE Sensex closing at 24,010.60 and 80,716.55, respectively.

Indicator Amount (Rs. Crore) FPI Net Investments 41,157

DII Net Investments 28,633.15

NSE Nifty 50 (closing) 24,010.60

BSE Sensex (closing) 80,716.55

UPI Transactions

The Unified Payments Interface (UPI) took a dip in June 2024, with 602 banks participating, compared to 598 in May 2024. The volume of transactions reached 13,885.14 million, and the value hit Rs.20,07,081.16 crore. UPI Transactions (June 2024) Indicator June 2024 May 2024 No of Banks live on UPI 602 598

Volume of Transactions 13,885.14 Million 14,035.84 million

Value of Transactions Rs.20,07,081.16 crore Rs. 20,44,937.05 crore

By Shrishti Sharma , ETBFSI