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Economic
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Table of Contents
Abstract..................................................................................................................................... 3
Supply-side growth analysis .................................................................................................... 5
Upbeat agricultural output ................................................................................................. 5

Rural Demand Strengthening ............................................................................................. 6

Industrial activity on an expansionary path...................................................................... 7

Housing demand strengthening .......................................................................................... 8

Services match the strong performance of the manufacturing ....................................... 9

India’s Booming E-Commerce Industry.......................................................................... 11

Private Final Consumption Expenditure (PFCE) attains Traction .................................. 13

Strong Consumption Boosts Robust Growth in Digital Payments.................................... 16
External sector witnessing signs of revival .......................................................................... 17
Box 1: Examining the relation between trade balance and GDP ...................................... 19
Prudent Fiscal Performance of the Union Government ..................................................... 20
Core Inflation lowest since April 2020 ................................................................................. 21
Monetary Policy Transmission ............................................................................................. 22
Policy rate hikes continue to work their way through the economy ............................. 22

Youth and Female Employment: Insights from the PLFS Report 2022-23 ..................... 24
Rising Youth Employment Coupled with Skill Development: Utilising the
Demographic Dividend ...................................................................................................... 25

Outlook ................................................................................................................................... 27
Performance of High-Frequency Indicators ....................................................................... 28

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Abstract

The Indian economy has been remarkably resilient amid a global slowdown, buoyed by solid
domestic demand. Major globally renowned rating agencies have also shown confidence in
India’s economic strength. While one agency has retained India's economic growth at 6.7 per
cent for FY24, another has raised India's medium-term potential growth estimate by 70 basis
points to 6.2 per cent.

The supply-side economy in FY24 so far vindicates the confidence. In the agriculture sector,
rapid progress in the procurement of wheat and rice has ensured a continuous increase in food
buffers. Rural demand has sustained sequential momentum in Q2 of FY24 as incomes from
foodgrain production have been stable and inflationary pressures moderate. At the same time,
increasing production and expansion in sales have been driving growth in the manufacturing
sector. Services activity has also been expanding, driven by favourable demand conditions and
a strong influx of new businesses. Despite rising input costs, overall sentiment in the services
sector remains upbeat, driven, among others, by an upswing in the tourism and hotel industry
as leisure and business travel pick up momentum.

On the demand side, private final consumption expenditure (PFCE) has emerged as the
strongest driver of India’s growth so far in FY24. The festive season has further strengthened
consumption demand. While accumulated savings and declining rates of unemployment
constitute the underlying strength of consumption demand, the wealth effect emanating from
rising real estate prices and growing capitalisation of equity markets may have also
strengthened consumption. Strong consumption has also been expressing itself digitally with
the UPI transactions reaching an all-time high and crossing 11 billion milestone in October
2023. The digital imprint of consumption, also seen in the substantial volume growth in
electronic toll collection, signals a behavioural shift towards a cashless economy.

Merchandise exports during October 2023 have surprised on the upside, with its growth
highest in 11 months. Services exports continued to turn out strongly in October 2023 as well.
Foreign Portfolio Investors (FPIs), which were net sellers in October 2023, have turned into
net buyers in the first half of November 2023. Stability in the rupee and adequacy in forex
reserves further support India’s improving performance in the external sector.

The Central Government is on track to achieve the budgeted deficit target for the current fiscal
year as well. Continued buoyancy in revenue collections supported by prudent expenditure
management has enabled the fiscal deficit to be contained within 40 per cent of the Budget
Estimate during the first half of the year. The government’s emphasis on capital expenditure
has continued during the year as well, imparting an impetus to private investment. The recent
steep and rapid decline in global crude oil prices removes an important source of potential
impact on public finances as well.

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Inflationary pressures have also moderated. Consumer price inflation (CPI) declined in
October 2023, mainly due to the dip in core (non-food, non-fuel) inflation. The overall CPI-C
inflation was at a four-month low, and its core component was the lowest in the last 43 months.
The trend in Wholesale Price Index (WPI) also suggests that the cost of principal inputs to
production in the economy has declined overall. Apart from the policy measures of the
Government, the transmission of the monetary policy tightening may be beginning to take
effect. Against a cumulative hike of 250 basis points (bps) in policy repo rate, lending rates
have increased by 187 bps in respect of fresh loans and 105 bps in respect of outstanding loans.

The recently released Periodic Labour Force Survey highlights positive trends on the youth
and gender fronts. A continuous decline in the annual youth unemployment rate accompanied
by greater youth participation in the labour force indicates better utilisation of demographic
dividend. This has coincided with steady progress in skill development, with nearly 1.4 crore
candidates trained under PM Kaushal Vikas Yojana since 2015. From the gender perspective,
the female labour force participation rate (FLFPR) has been rising for six years now. Its being
driven by the rural FLFPR could be a culmination of many factors, including continuous high
growth in agriculture output and freeing up of women’s time due to substantial expansion of
access to basic amenities.

With more than half of the current financial year witnessing positive developments in the
economy, the full financial year should conclude as projected with a strong growth
performance and macroeconomic stability. Yet risks on the downside persist. Inflation is one
of them that has kept both the government and the RBI on high alert. Financial flows in the
external sector also need constant monitoring as they impact the value of ₹ and the balance of
payments. A fuller transmission of the monetary policy may also temper domestic demand. The
rapid reversal of rate hike expectations in the US and the slide in the US 10-year Treasury
yield, coupled with the decline in oil prices, is good news for emerging markets in general,
India included. However, the ‘priced to perfection’ US stocks continue to be a source of
potential risk for global stocks. On balance, however, India’s growth experience in FY24 will
continue to be a positive outlier as compared to other major economies. In the medium term,
thanks to the sustained focus on public investment in infrastructure and advances in digital
public infrastructure, India can look ahead to the prospect of a longer economic and financial
cycle than in the past, subject to global factors.

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Supply-side growth analysis

Upbeat agricultural output

1. The supply-side components of GDP provide ample evidence of the strengthening of

the economy across all sectors. Agriculture is one such sector wherein the sowing of Kharif
crops in 2023-24 has been higher than the last year, as well as the average of the past five years.
Consequently, the first advance estimates for 2023-24 show the robust expected output of
major Kharif crops. Rabi sowing has also shown healthy progress in the current year, building
on expectations of robust Rabi output as well. High reservoir levels, adequate availability of
fertiliser and seeds, and growing tractor sales support improvements in sowing acreage and
output outturns. At the same time, rapid progress in the procurement of wheat and rice has
ensured a continuous increase in food buffers. Rising buffer stock would aid in curbing
inflationary pressures caused by uneven rainfall distribution in the country, besides
strengthening food security.

Kharif sowing in 2023-24 was 0.2 per cent higher compared to the previous year and 1.5 per cent higher
than the average sowing in the past five years. Area sown under rice and sugarcane were higher than
that in the previous year by 1.9 per cent and 7.8 per cent, respectively. Production of Kharif crops is
estimated at 148.6 million tonnes in 2023-24, 3.1 million tonnes higher compared to the average
foodgrain production in the past five years. As of 10th November 2023, overall rabi sowing stood at
140.8 lakh hectares, 1.6 per cent higher as compared to the previous year. The area sown under rabi
oilseeds is 8.9 per cent higher in 2023-24 compared to the previous year, which bodes well for oilseeds
production.

Foodgrain production of major Kharif crops Increasing Procurement of Wheat and

in 2023-24 higher than past 5 years' average Rice
149
Rice Wheat
148 38
433
390
Million Tonnes

30 29 28
Lakh Metric Tonne

147
262
146
188

145

144
2020-21

2021-22

2022-23

2023-24
2020-21
2021-22
2022-23
2023-24

143
Past five years average 2023-24
Source: Ministry of Agriculture and Farmers Welfare Source: Food Corporation of India
Note: Data for Rice Procurement is as of 1st
November

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Current water levels in reservoirs are sufficient to irrigate the rain-fed swathes of the agriculturally
important regions. As of 2nd November 2023, total live storage in 150 important reservoirs is nearly 79
per cent of last year's storage and 91 per cent of the average of the last ten years.

Fertiliser sales were 5.7 per cent higher in September 2023 compared to the corresponding period of
the previous year. Availability of fertilisers against requirement is comfortable for rabi sowing 2023-
24. Enough quality seed is available to ensure the smooth sowing of the rabi crops. The seed availability
stands at 325.3 lakh quintals against the requirement of 293 lakh quintals in the country for Rabi 2023-
24. Tractor sales registered the strongest sequential increase in October 2023. Credit support to
agriculture also expanded further in September 2023, registering 16.8 per cent growth on a YoY basis.

Rising Tractor Sales Rising Bank Credit to Agriculture sector

140 Bank Credit to Agriculture Sector
20 YoY growth (RHS) 25
120

100 20
15
80 15
'000

₹ Lakh Crore

10

Per cent
60
10
40
5
5
20

0 0 0
Apr-22

Aug-22

Nov-22
Dec-22

Mar-23
Apr-23

Aug-23
May-22
Jun-22
Jul-22
Sep-22
Oct-22

Jan-23
Feb-23

May-23
Jun-23
Jul-23
Sep-23
Apr-22

Jun-22

Aug-22

Oct-22

Dec-22

Apr-23

Jun-23

Aug-23

Oct-23
Feb-23

Source: TMA Source: RBI

Wheat procurement from 1st April to 15th October 2023 in the ongoing Rabi Marketing Season (April-
March) has surpassed the procurement in the corresponding period of the previous year by 39.4 per
cent. In the ongoing Kharif Market Season1 as well, 108.2 LMT of rice has been procured as of 1st
November 2023, with Punjab, Haryana, and Tamil Nadu being the major contributors2, benefiting about
25 lakh farmers. A total quantity of 521.3 LMT rice is estimated to be procured during the entire season
of 2023-243. This augurs well for adding strength to rural demand in the coming months. Food security
is also ensured with total foodgrain stocks with Food Corporation of India (FCI) maintained at 1.8 times
the buffer norm requirement for the Oct-Dec 2023 period.

Rural Demand Strengthening

2. Rural demand has sustained sequential momentum in Q2 of FY24 as incomes from

foodgrain production have been stable and inflation moderate. Several indicators, such as sales

1
Kharif Marketing season is from October to November
2
https://pib.gov.in/PressReleaseIframePage.aspx?PRID=1974152#:~:text=Rice%20procurement%20estimates%
20for%20KMS,Tamil%20Nadu%20(3.26%20LMT).&text=by%20PIB%20Delhi-
,Kharif%20Marketing%20Season%20(KMS)%202023%2D24%20is,progressing%20smoothly%20and%20upto
%2001.11.
3
Rabi Marketing season is from April to March

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of fast-moving consumer goods (FMCG) and two & three-wheelers, point towards
improvement in rural demand. Going forward, rising rural wages, increasing minimum support
prices, and prospects of healthy rabi sowing will add further strength to the rural demand.

As per the data released by Nielsen IQ, rural markets reported a 6.4 per cent jump in volume sales of
Fast-Moving Consumer Goods (FMCG) in Q2 of FY24. The FMCG industry also witnessed growing
traction in rural wage growth and a reduction in price growth from the last quarter, which gave an
impetus to the spending power of the consumer. Two and three-wheeler sales registered double-digit
growth in October 2023. The cooling of inflation, decline in unemployment and LPG prices, amongst
other factors, have contributed to an increase in the willingness of the consumer to spend. Moderating
inflation and the festivities in Oct-Nov 2023 are expected to further improve rural consumption in the
Oct-Dec 2023 quarter.

Volume growth in rural Fast Moving Rural wage growth gaining traction
Consumer Goods (FMCG) sales in Q2: FY24
Rural Urban Total Agri Wages Non-Agri Wages
12
12
10

8
6
6
Per cent
Per cent

0 2

-2
-6
Apr-18

Jul-19
Dec-19
May-20

Mar-21
Aug-21

Nov-22
Apr-23
Sep-18
Feb-19

Oct-20

Jan-22
Jun-22
Q1 Q2 Q3 Q4 Q1 Q2
FY23 FY24
Source: Nielsen IQ Source: Labour Bureau

Industrial activity on an expansionary path

3. PMI Manufacturing in India has been in an expansionary zone for the past 28 months,
heralding a strong, solid, and sustained recovery from the pandemic. Increasing production,
expansion in sales and positive market dynamics have been driving the expansion in the overall
manufacturing activity, as evident in the October print. Robust September prints of the Index
of Industrial Production (IIP) and Index of Eight Core Industries (ICI) offer fresh evidence of
sustained growth in manufacturing activity. The trajectory of manufacturing activity is firm
enough to withstand temporary headwinds of rising input costs and realignment of production
lines with fast-paced changes in consumer preferences.

PMI Manufacturing stayed in the expansionary zone but slipped from 57.5 in September 2023 to 55.5
in October 2023, possibly due to a temporary fall in demand and rising raw material costs (especially

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aluminium, steel, chemicals, and leather). Despite the moderation, India’s manufacturing sector
performed well compared to major economies.

The IIP expanded by 5.8 per cent in September 2023, higher compared to 3.3 per cent in September
2022. Infrastructure goods (consisting mainly of construction materials) and capital goods saw robust
growth of 7.5 per cent and 7.4 per cent, respectively, in September 2023. This signifies continued pick-
up in capital formation in the economy. Intermediate goods registered a growth of 5.8 per cent in
September 2023, indicating a built-up in the inventories for production in October 2023. The ICI grew
by 8.1 per cent in September 2023 compared to 12.5 per cent growth in August 2023. The growth in
core industries was mainly propelled by the growth of coal, steel, and electricity sub-sectors. Cement
and steel account for about 60 per cent of the material inputs of construction, as assumed in national
accounts statistics. The robust growth of the steel and cement sub-sectors in September 2023 indicates
continuing momentum in construction activity and capital formation.

India’s PMI Manufacturing was higher Growth in IIP and its sub-components in
than that in major economies September 2023
India USA UK Japan
65
Per cent

11.5

9.9

8.0
60

7.5
7.4

2.0
5.9
5.8

1.0
4.5

Mining

Primary Goods

Capital Goods

Intermediate Goods

Con. Durables

Con. Non-Durables
Manufacturing

Electricity

Construction Goods
Index

55

50

45
IIP Broad Industrial User based category
Apr-22

Apr-23
Jan-22

Jul-22

Oct-22

Jan-23

Jul-23

Oct-23

activity

Source: Bloomberg, IHS Markit Source: MoSPI

Housing demand strengthening

4. The increase in steel consumption and cement production is substantially induced by
continuously strengthening housing demand as both housing sales and new launches increase
in Q2 of FY24 over the levels in Q2 of FY23. Households have been critical in keeping up
demand through rising housing investment and consumption.

As per the data released by Anarock, despite high interest rates and rising real estate prices, housing
sales and launches in India’s top 7 cities jumped by 36 per cent and 24 per cent respectively on a YoY
basis during the Jul-Sep 2023 quarter. Rising housing sales and launches have been accompanied by a
fall in inventory overhang. Existing housing inventory saw a 3 per cent decline across the top 7 cities,
from around 6.3 lakh units at the end of September 2022 to about 6.1 lakh units at the end of September
2023.

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Steel consumption and cement production in Increasing Housing Sales and Launches
Apr-Sep-23 higher compared to last year
Jul-Sep 2022 Jul-Sep 2023
Apr-Sep (FY23) Apr-Sep (FY24) 120.3 116.2
641
558 93.5
88.2

No. of Houses (Thousand)

163.3 182.1

Steel Consumption Cement Production

(Lakh Tonnes) (Index) Housing Sales New Launches
Source: Joint Plant Committee (JPC), DPIIT Source: Anarock

Services match the strong performance of the manufacturing

5. Like manufacturing, PMI Services has also remained in an expansionary zone in the
last 27 months, buoyed by favourable demand conditions, a strong influx of new businesses,
and supportive market dynamics. Despite rising input costs, overall sentiment in the services
sector remains upbeat, driven, among others, by an upswing in the tourism cum hotel industry
induced by leisure travel, business travel, and social events. September marks the seventh
straight month when domestic air traffic in India has surpassed pre-Covid levels in India.

The prevalence of competitive conditions and rising cost pressures (food, fuel, and staff costs) led to a
moderation in PMI services to 58.4 in October 2023 from 61 in September 2023. Despite rising input
prices, production activity remained strong, and exports continued to rise in October. Overall sentiment
in the service sector firms is seeing continuous improvement. As per the latest RBI Services and
Infrastructure Outlook Survey4, respondents remain optimistic about the overall business situation,
turnover, and employment conditions in Q3 of FY24, coupled with the expectation of easing pressures
from wage bills, input costs and cost of finance.

Tourism has become a vital driver of a strong upswing in contact-intensive activity. The impressive
recovery of the tourism sector has given a boost to the hotel industry. The growth in the hospitality
sector was driven by domestic leisure travel growth, the resumption of business travel in the country,
as well as wedding and social events. In the first six months of FY23, revenge travel has witnessed a
gradual decline; however, demand in the leisure segment remains strong. The MICE (Meetings,
Incentives, Conferences, Exhibitions) segment and corporate travel segment continue to recover despite
the hybrid work culture, online meetings, and higher airfares slowing the turnaround rate. With the

4
https://www.rbi.org.in/Scripts/PublicationsView.aspx?id=22057

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recovery of the tourism sector, a surge in corporate travel and a rebound in MICE tourism and Bleisure
travel, domestic air passenger traffic has surpassed the pre-pandemic level.

PMI Services and its sub-components Increase in Domestic Air Passenger Traffic
PMI Services New Business
Domestic Air Passenger Traffic
Input Prices New Export Business
Average Pre-Pandemic level
65 3

No. of Passengers (Crore)

60
2
55
Index

50
1

45

40 0

Apr-22

Apr-23
May-22
Jun-22
Jul-22
Aug-22
Sep-22
Oct-22
Nov-22
Dec-22
Jan-23
Feb-23
Mar-23

May-23
Jun-23
Jul-23
Aug-23
Sep-23
Jan-22

Apr-22

Jul-22

Jan-23

Apr-23

Jul-23
Oct-22

Oct-23

Source: IHS Markit Source: Ministry of Civil Aviation

Robust Hotel Industry Rise in FTA and FEE during Jan-Sep 2023
Average Daily Rate
Revenue per Available Room 2022 2023
Hotel Occupancy Rate (RHS)
8 80
20239
₹ Thousand

Per cent

4 40 11353

6432
3855

0 0
Apr-22

Apr-23
May-22

Jan-23

Mar-23
Jun-22
Jul-22
Aug-22
Sep-22
Oct-22
Nov-22
Dec-22

Feb-23

May-23
Jun-23
Jul-23
Aug-23
Sep-23

Foreign Exchange Earnings Foreign Tourist Arrivals

(USD Million) (Thousand)
Source: Anarock Source: Ministry of Tourism

As per the latest UNWTO World Tourism Barometer5, international tourism has recovered 84 per cent
of the pre-pandemic levels in the January-July 2023 period, highlighting the remarkable resilience and
recovery of travel demand amid economic and geopolitical challenges. The impact of increased
international tourism is also evident in the Indian tourism industry. Foreign Tourist Arrivals (FTAs) in
India during January-September 2023 are 66.9 per cent higher compared to the corresponding period of
the previous year but are yet to recover the pre-pandemic level. Rising FTAs is accompanied by an
increase in Foreign Exchange Earnings, which were 78.3 per cent higher during the first nine months
of 2023 compared to the corresponding period of the previous year.

Nation-wide hotel occupancy rate was lower in September 2023 compared to 2022 and 2019,
respectively, hovering around the 60-62 per cent mark, possibly an outcome of increasing average room

5
https://www.e-unwto.org/doi/epdf/10.18111/wtobarometereng.2023.21.1.3

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rates. The average daily rate was 27-29 per cent higher in September 2023 compared to September
2022, as hotels continued to charge higher rents compared to last year. Domestic Air Passenger Traffic
rose 18.3 per cent in September 2023 compared to the same month last year.

India’s Booming E-Commerce Industry

6. India’s booming e-commerce industry is another strong pillar of the country’s services
sector, which has brought the convenience of purchases to the doorstep of most households in
tier 2 and tier 3 cities as well. Household consumption demand has resultantly risen and is
served by a growing army of logistic service providers who significantly constitute the rising
levels of employed workforce in the country. The origins of e-commerce trace themselves to
several initiatives taken by the government, including Digital India, Make in India, Start-up
India, and Innovation Fund, among others. India’s e-commerce market is expected to reach
USD 163 billion by 2026, with online sales accounting for over 25 per cent of the sales across
major non-grocery retail categories. This phenomenal growth is expected to be propelled by
the expanding middle class, accessibility to high-speed internet across Tier-II and Tier-III+
regions and adoption of recent technology that offers seamless shopping experiences to
consumers.

The E-Commerce industry has experienced a remarkable journey over the past few years, with the
COVID-19 pandemic acting as a catalyst for accelerated growth. The pandemic-induced lockdown and
mobility restrictions drove demand for e-commerce to new highs by bringing new shoppers and sellers
onto the digital platforms and offering players long-term growth. Containment efforts introduced people
to the convenience of online buying and motivated online buyers to buy more, thereby making the
Indian e-commerce business one of the significant beneficiaries of the pandemic.

The E-commerce industry is growing on levers such as a surge in smartphone penetration, increased
affluence, and low data prices, which provide an impetus for e-retail growth. The consistent growth
observed in FY23 underscores the confidence consumers have in e-commerce as a reliable and
convenient shopping channel. This promising trend signals a significant shift in consumer behaviour
and signifies a long-term market potential for e-commerce in India. The Government has taken various
initiatives, namely Digital India, Make in India, Start-up India and Innovation Fund, among others, to
give a boost to the e-commerce market. The various e-commerce policies and guidelines introduced by
the Government addressing several aspects, including Foreign Direct Investment, consumer protection,
data privacy, and marketplace conduct, have played a major role in ensuring transparency and enhancing
trust among consumers and businesses.

As per a report by UNICOMMERCE on ‘India E-Commerce Index 2023’6, the overall order volume
witnessed a growth of 26.2 per cent in FY23, indicating a flourishing e-commerce landscape in India,
supported by a 23.5 per cent rise in annual Gross Merchandise Value (GMV) as compared to FY22.

6
https://infowordpress.s3.ap-south-1.amazonaws.com/wp-content/uploads/2023/08/14114209/India-Ecommerce-
Index-2023.pdf

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This sustained momentum signifies that consumers have embraced online shopping and that the initial
surge caused by the pandemic was not a one-off phenomenon.

“Omnichannel”, a hybrid online-offline business model, is also emerging as a critical growth driver.
Many e-commerce startups prefer this route as it helps them cater to a more extensive consumer base
and design more diversified consumer experiences. The growth of omnichannel is expected to continue
at a rapid pace as more brands leverage their physical stores to fulfil online orders. Notably, this trend
extends to marketplace orders as well, as marketplaces are also utilising stores for order fulfilment. An
analysis by UNICOMMERCE highlights a noteworthy 58.4 per cent increase in the number of stores
implementing omnichannel operations in FY23.

The emergence of e-commerce categories such as Home Decor and Health and Pharma have
demonstrated their significance in the digital shopping arena, while well-established segments like
Fashion and accessories and Beauty and Personal Care continue to offer strong evidence to support the
overall growth of the e-commerce industry in India. With most of India’s population residing in Tier-II
and Tier-III cities, both global and domestic brands are actively expanding into these markets to unlock
their next phase of growth. These regions now have access to high-speed internet, prompting brands to
establish warehousing and distribution facilities in these areas. Tier-I cities, which experience higher
population density, remain the primary generators of e-commerce order volume in the country.

Growth in GMV and Order Volume in Tier-wise Market Share

various categories of industries in FY23
Growth in Gross Merchandise Value 2022 2023
Order Volume Growth
44.3
Others 42.2
38.6 37.1
Home

Health and Pharma

Per cent

FMCG and Agriculture

Fashion and Accessories 19.2 18.6

Eyewear and Accessories

Electronics and Home…

Beauty, Wellness and…

0 10 20 30 40 50 60
Per cent Tier-I Tier-II Tier-III
Source: UNICOMMERCE

A recent report by Redseer Consulting7 estimated that India’s e-commerce market is expected to reach
USD163 billion by 2026, with online sales accounting for over 25 per cent of the sales across major
non-grocery retail categories. This phenomenal growth is expected to be propelled by the expanding
middle class, accessibility to high-speed internet across Tier-II and Tier-III+ regions and adoption of
recent technology by brands to offer seamless shopping experiences to consumers.

7
https://economictimes.indiatimes.com/industry/services/retail/view-consumers-building-the-e-commerce-
odyssey/articleshow/103126518.cms

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Private Final Consumption Expenditure (PFCE) attains Traction

7. The Indian economy has been described as an outlier in becoming the fastest-growing
major economy in the world. Private final consumption expenditure (PFCE) is seen as the
strongest driver of India’s growth. Some commentators observe that India’s growth may soften
soon as PFCE is likely to taper early in the current year. Yet, so far, there is no evidence of that
happening. Moreover, there are reasons to believe that it may not happen anytime soon. First,
reports bear out that the festive season is keeping the PFCE propped up; second, the post-
pandemic shift towards services in the consumption basket elicits a quicker supply response
than goods; third, the unemployment rate is steadily declining, increasing disposable income
for spending purposes; fourth, the pre-pandemic moderating growth in housing prices has given
way to stronger growth, which has generated a substantial wealth effect to induce spending by
households who own houses; fifth, a similar wealth effect has emanated from increasing stock
market capitalisation; and sixth, surveys indicate no letting up in PFCE.

Key high-frequency indicators for consumption exhibiting strong YoY growth (April-
September 2023) (per cent)

Passenger Vehicle Sales

Vehicle Registraton (Apr-Oct)

Outstanding Credit of Scheduled Commercial

banks

Domestic Air Passenger Traffic

Credir Card Transactions

0 10 Per cent 20 30
Source: VAHAN, RBI, SIAM

The robust increase in consumption is evident in key high-frequency indicators registering strong
growth in the April-September 2023 period compared to the corresponding period last year. Various
reports also point to a surge in consumer spending during the ongoing festive season, reflecting
buoyancy in demand.

Various concurrent factors have played a key role in driving India’s consumption story. Unfolding latent
demand that could not find an outlet during the pandemic-driven lockdown is the most crucial factor
boosting consumption demand. The unfolding is evident in the improvement of leading variables in the
services sector, induced by the shifting composition of the consumption basket towards services in a
lockdown-free environment. All services sector indicators have shown rising trajectories in the
September 2023 quarter.

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A steady decline in the urban unemployment rate has further contributed to keeping private
consumption strong by increasing the disposable income in the economy. Labour markets have
remained buoyant, with historically low unemployment rates helping to support economic activity. Real
wages are also catching up, enhancing the disposable income of the households.

The wealth effect has also played an important role in keeping consumption levels elevated. The
COVID-19 pandemic dampened the housing demand and reduced real estate activities to an all-time
low, leaving a whole lot of unsold inventory. This tempered the growth in housing prices and house
rentals. Consequently, owners of real estate saw their wealth diminishing since housing forms the most
important component of the non-financial wealth of households. The price trend was subsequently
reversed with the removal of lockdown restrictions, return of labour to cities, resumption of offices and
strengthening of domestic economic activity. As a result, housing prices have begun to firm up, and
households realised hefty, accrued gains. This made them feel richer than earlier inducing consumption.
Accrued gains converted to real gains for those who sold their properties.

Strong growth in the Housing price index

Index YoY change (RHS)
320 8

300 6

Per cent
280 4
Index

260 2

240 0
Mar-17
Jun-17
Sep-17
Dec-17
Mar-18
Jun-18
Sep-18
Dec-18
Mar-19
Jun-19
Sep-19
Dec-19
Mar-20
Jun-20
Sep-20
Dec-20
Mar-21
Jun-21
Sep-21
Dec-21
Mar-22
Jun-22
Sep-22
Dec-22
Mar-23
Jun-23

Source: RBI

The Housing Price Index registered an average monthly growth of 2.3 per cent from June 2020 to March
2022 (from the first wave to the end of the third wave of the pandemic in India), compared to an average
YoY growth of 4.1 per cent from June 2022 to June 2023 clearly reflecting the momentum gathered in
the housing market post the pandemic. Yet, as per ANAROCK research, H1 2023 saw an all-time high
housing sales of approx. 2.29 lakh units across the top seven cities, which is over 63 per cent of the total
sales recorded in 2022. Aided by robust sales, existing housing inventory declined by 2 per cent yearly
in Q2 2023 across the top seven cities. Housing prices are expected to rise further as housing demand
appears to be brisk.

An increase in stock market capitalisation has been another factor driving the wealth effect and leading
to strong consumption growth. Like an increase in housing prices does, an increase in stock prices can
also engender a wealth effect. Solely an increase in stock prices can generate expectations effect. When
the asset goes up in value, it results in higher consumption today on the expectation that income and
wealth will be higher in the future. Various studies have established that financial asset wealth in the

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form of stock market capitalisation significantly affects the PFCE in India. There is a long-run positive
relationship between financial wealth assets and household consumption, implying that households are
closely linked with the financial markets through their investments in the form of insurance, mutual
funds, company deposits, company stocks, and other forms8.

Rising stock market capitalisation (BSE) Nifty 50 Index witnessed continued growth
350 20,000

300 19,000
₹ Lakh Crore

250 18,000

Index
200 17,000

150 16,000

100 15,000
Mar-18

Mar-19

Mar-20

Mar-21

Mar-22

Mar-23
Sep-18

Sep-19

Sep-20

Sep-21

Sep-22

Sep-23

Jan-22
Mar-22
May-22
Jul-22

Nov-22
Jan-23
Mar-23
May-23
Jul-23
Sep-22

Sep-23
Source: SEBI
India VIX witnessed declining trend
30

25
Index

20

15

10
Apr-22

Jun-22

Dec-22

Apr-23

Jun-23
Jan-22
Feb-22
Mar-22

May-22

Jul-22
Aug-22
Sep-22
Oct-22
Nov-22

Jan-23
Feb-23
Mar-23

May-23

Jul-23
Aug-23
Sep-23
Oct-23
Nov-23

Source: SEBI
Notes: November data is till 11th November 2023

The Indian stock market saw a resilient performance, with the Nifty 50 index registering a return of
12.1 per cent during Jan 2022-Oct 2023. Accompanied with higher returns, India VIX, which measures
expected short-term volatility in the stock market and which rose to a high of 32.0 on 24th February
2022 with the outbreak of the Russia-Ukraine conflict, has registered a sustained decline to an average
of 15.1 during March 2022 to Oct 2023.

8. Going forward, consumption expenditure is expected to remain strong with the

continued realisation of the wealth effect, decline in inflationary pressures, improvement in

8
https://onlinelibrary.wiley.com/doi/abs/10.1002/ijfe.2251

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real wages and further improvement in consumer sentiments. As per the latest RBI Consumer
Confidence Survey of September 2023, the current situation index reached a four-year high on
the back of a better assessment of the current general economic situation and employment
conditions. The general economic outlook, as well as the prospects for employment, income
and spending, are expected to improve further over the next year as reflected in the future
expectations index (FEI), also reaching a four-year high in the latest survey round.

Strong Consumption Boosts Robust Growth in Digital Payments

9. Unified Payments Interface (UPI) transactions soared to an all-time high in October
2023. A decrease in average ticket size for UPI transactions indicates a growing depth in the
usage of digital payments, reaching out to smaller transactions as well. Double-digit growth in
Electronic Toll Collection (ETC) volume during October 2023 further reflects the rising
adoption of digital payments, signifying a behavioural shift, which is a testimony to the success
of the government’s initiatives on paving the way to a cashless economy. This also aligns with
the Digital India initiative. Going forward, low transaction costs combined with innovative
fintech digital products and robust digital infrastructure will further bolster the digital payments
ecosystem.

The UPI transactions continue to break records and have crossed 11 billion transactions in October 2023
on the back of the solid festive demand. It has also been increasingly used as a mode for micro-
transactions, indicative of a deeper penetration of digital payments and acceptance by both buyers and
sellers. This is evident from a decrease in the average ticket size for person-to-merchant UPI
transactions from ₹731 in October 2022 to ₹658 in October 2023. Further, the average daily ETC
volume rose by 13 per cent in October 2023, led by higher industrial and commercial activity aided by
favourable demand conditions.

Rise in Digital Payments Double Digit Growth in Average Daily

ETC Collection
UPI Digital payments Average Daily ETC Volume
14 2022 2023
120
12

10

8 100
Billion

Lakh

4
80
2

0
Apr-22

Jul-22

Apr-23

Jul-23

60
Jan-22

Oct-22

Jan-23

Oct-23

Jan Feb Mar Apr May Jun Jul Aug Sep Oct
Source: NPCI, RBI Source: IHMCL

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External sector witnessing signs of revival

10. There is increasing likelihood of the “soft landing” scenario of global growth
projections for 2023, led by the United States, with inflation gradually coming under control9.
Risks of a recession may reappear, however, in 2024. Global trade numbers for 2023 are,
however, expected to remain weighed down as world merchandise trade volume is expected to
decline, as reflected in the WTO’s October 2023 Global Trade Outlook and Statistics.10
Uncertainties in the form of higher food and energy prices continue to persist amidst
geopolitical tensions. Yet, on a MoM basis, and contrary to the tepid outlook, global trade grew
by 2 per cent in October 2023. The global containerised trade volume in this month was also 5
per cent higher YoY, providing further evidence of an uptick in trade.11

11. For India as well, estimates of the Keil trade indicator suggest an expected increase in
trade flows, both imports as well as exports, in November 2023. This is also confirmed by the
latest trade estimates for October 2023, suggesting growth in both exports and imports on a
YoY basis, though higher growth in imports relative to exports has resulted in an increase in
the overall merchandise trade deficit compared to the corresponding period last year. Gold and
silver imports almost doubled in October 2023 compared to October 2022, signalling the robust
demand during the festival season. Yet, cumulative estimates for the trade deficit, on the back
of slowing merchandise and service imports, show a considerable decline in April-October
2023 over the corresponding period of 2022.

Despite fears of weak global demand, India’s merchandise exports and imports registered a YoY growth
of 6.3 per cent and 12.4 per cent, respectively, during October 2023. This resulted in a widening of
merchandise trade balance on both YoY and MoM basis during the month. Commodities driving
exports during October 2023 include iron ore, ceramic products and glassware, tobacco, cereal
preparations and processed items, among others. Exports of engineering goods rose by 7.3 per cent in
October 2023 compared to the corresponding period of the previous year. Imports were driven by
pulses, gold and silver, among other commodities. For April-October 2023, the merchandise trade
balance improved by 12 per cent due to a considerable decline in the merchandise value of imports,
especially POL imports, which reduced from USD 123 billion in April- October 2022 to USD 99.9
billion in the corresponding period in 2023.

On the services front, continued demand for India’s services exports resulted in a YoY increase in
services trade surplus by 22 per cent in October 2023 and by 6.2 per cent during April-October 2023.12

9
World Economic Outlook (October 2023), IMF
10
https://www.wto.org/english/res_e/booksp_e/gtos_updt_oct23_e.pdf
11
https://www.ifw-kiel.de/publications/news/global-trade-increases-significantly/
12
Disaggregated data released by the RBI on services receipts for Q1FY24 shows a 7.5 per cent increase on
account of services, primary income and secondary income. Services receipts continue to retain the highest share
of around 70 per cent in total invisible receipts and expanded by 5.9 per cent during Q1 of FY24, driven by growth
in receipts from travel, telecommunication, construction, financial, business, and manufacturing services,
indicating broad diversification in the services exports. Inward remittances from Indians working abroad grew by
5.3 per cent during the same period.

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India’s Merchandise Export performance India’s services performance

Service Receipt Service Payment
Exports Imports Net Services Surplus
70
35
60
30
50 25
USD Billion

40

USD Billion
20
30 15
20 10
10 5
0 0
Apr-22

Jun-22

Aug-22

Oct-22

Dec-22

Feb-23

Apr-23

Jun-23

Aug-23

Oct-23

Apr-22

Jun-22

Aug-22

Oct-22

Dec-22

Feb-23

Apr-23

Jun-23

Aug-23

Oct-23
Source: Department of Commerce

12. Foreign portfolio investment (FPI) witnessed net positive inflows during FY24 (till 16th
November 2023) as compared to net outflows during the corresponding period last year. This
is mainly on account of the strong macroeconomic fundamentals of the Indian economy
indicated by lower volatility in the Indian rupee, moderation in inflation, fiscal consolidation,
etc.

Stronger FPI inflows during FY24

25 FY23 FY24

20

15
USD billion

10

-5

-10
April May June July August September October November Total
**

Source: NSDL; **: November data for FY24 is till 16 November 2023

Monthly FPI inflows witnessed an outflow of USD 2.1 billion in October 2023, with recovery being
observed in the latest data for November (with a net inflow of USD 1.5 billion till 16th November 2023),
assisted by stabler currency. Debt instruments, in particular, has been consistently attracting investor
interest, recording a net inflow of USD 5.2 billion during FY24 (till 16th November 2023), as against
FY23, when all months witnessed an outflow. However, FPI in debt instruments could be more volatile
in nature; it is the equity-based FPI that holds steady, given the large volume and strength of the Indian

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equity markets.13 Appropriately, the share of equity-based FPI in total FPI inflows is much larger than
the debt-based FPI. During FY24 (till 16th November 2023), equity-based FPI inflow was thrice that of
debt-based FPI, i.e., USD 15 billion, recovering substantially over April-November 2022, when it
recorded an outflow of USD 3.3 billion.

13. Improvements in trade balance on account of robust services exports, moderation in

merchandise imports and positive FPI inflows during April-October 2023, inter alia,
contributed towards an increase in foreign exchange reserves to USD 590.8 billion as of 3rd
November 2023 from USD 578.4 billion at end-March 2023.

Box 1: Examining the relation between trade balance and GDP

Theoretically, there exists a circularity (endogeneity, in economists’ jargon) between trade

balance and GDP; that is, trade contributes to improvement in real income and per capita
growth, and improvements in GDP enable tapping opportunities in the external sector. As
per the latest available data, double-digit growth in the trade balance for two consecutive
quarters (Q4-FY23 and Q1-FY24) on a YoY basis helped sustain the GDP growth. With
exports broadly maintaining momentum, a decline in imports during Q1 of FY24, when
compared to Q1 of FY23, facilitated improvement in the trade balance, thereby reducing the
drag on the GDP number for the quarter. Post FY18, exports and import growth are seen to
be tracing the GDP growth over the years.

Exports and Import growth tracing GDP growth

80 Export growth Import growth GDP growth (RHS) 40

60 30

40 20
Per cent

Per cent

20 10

0 0

-20 -10

-40 -20

-60 -30
Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1
FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 FY22 FY23FY24
Source: Department of Commerce

13
IMF Working Paper WP/17/41 “The Volatility of Capital Flows in Emerging Markets: Measures and
Determinants”

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Prudent Fiscal Performance of the Union Government

14. The Central Government’s commitment towards fiscal consolidation is underlined by

the achievement of the budgeted fiscal deficit targets over the past years. An analysis of the
fiscal performance of the Government in the first half of the year 2023-24 indicates that the
Central Government is on track to achieve the budgeted deficit target for the current fiscal year
as well. Continued buoyancy in revenue collections supported by prudent expenditure
management has enabled the fiscal deficit to be bound within 40 per cent of the Budget
Estimate during the first half of the year. Moreover, the Government’s emphasis on capital
expenditure has continued during the year, imparting an impulse to private investments and
strengthening the positive sentiment in the economy.

Buoyant revenue collections in Apr-Sep 2023 have supported the fiscal situation of the Government.
The net tax revenue of the Government in Apr-Sep 2023 rose by 14.7 per cent year-on-year to ₹11.6
lakh crore. The 20 per cent growth in corporate tax collections and 31 per cent increase in the personal
income tax collections registered during the first half of the year is much higher than the YoY growth
budgeted for the full year 2023-24.

Reflecting the robust performance of economic activity, the gross GST collections for October 2023 at
₹1.72 lakh crore was the second highest ever monthly collection for Centre and States put together. As
a result, the Centre’s GST revenue for Apr-Sep 2023 increased by nearly 9 per cent on a YoY basis.

On the expenditure front, capital expenditure by the Government during the first six months of the fiscal
year was recorded at Rs 4.9 lakh crore, nearly 50 per cent of the Budgeted target for the year. This
implied an increase of 43 per cent on a YoY basis. However, the revenue expenditure from Apr-Sep
2023 stood at less than half (46.5 per cent) of the annual target.

Continued increase in direct tax Prudent expenditure management with

collections in first six months emphasis on capex
5 40
35.0
4
30
₹ Lakh Crore

₹ lakh crore

3 46.5 %
20 of BE
2 10.0
10 49% of
BE
1
0
0 BE 2023- Apr-Sep BE 2023- Apr-Sep
FY18
FY19
FY20
FY21
FY22
FY23
FY24

FY18
FY19
FY20
FY21
FY22
FY23
FY24

24 23 24 23
Capital expenditure Revenue expenditure
Corporation Tax Personal Income Tax
Source: O/o CGA Source: O/o CGA and Union Budget Documents

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Core Inflation lowest since April 2020

15. Retail inflation, measured by the Consumer Price Index (CPI), has moderated to 4.9 per
cent in October 2023 from 5 per cent in September 2023. The fall in inflation was mainly due
to the decline in core (non-food, non-fuel) inflation, while food inflation in October 2023
remained the same as in September 2023. Overall inflation stood at a four-month low in
October 2023, while its core component was the lowest in the last 43 months.

Declining Retail Inflation Policy Repo Rate and Core Inflation

Headline Inflation Food Inflation Policy Repo rate Core Inflation
14 7

12

10 6

Per cent
Per cent

6
5
4

0 4
Apr-22

Apr-23
Jul-22

Oct-22

Jan-23

Jul-23

Oct-23
Oct-22

Dec-22

Feb-23

Apr-23

Jun-23

Aug-23

Oct-23

Source: MoSPI Source: MoSPI and RBI

Declining contribution of ‘select’ food items to retail inflation

cereals Milk Vegetables Pulses Spices

Oct - 23 19.8 8.5 3.8 8.8 13.2

July - 23 15.3 7.1 31.9 4.0 8.0

April - 23 -8.2 25.3 12.0 2.6 9.9

Source: MoSPI
Note: Figures excludes the contribution of oils and fats, fruits, egg, meat, fish, and sugar among food items

While CPI food inflation in October 2023 remained the same at 6.6 per cent, as in September 2023, CPI
core inflation declined to 4.3 per cent in October from 4.5 per cent a month ago.

16. The trends emerging from inflation measured in terms of the Wholesale Price Index
(WPI) also suggest that the cost of principal inputs to production in the economy has declined

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on the whole. This is facilitated by the international commodity price scenario turning benign
of late and by the calibrated administrative and trade policy measures implemented by the
Government, vigilantly monitoring the prices of principal inputs of production.

WPI-based inflation rate was (-) 0.5 per cent in October 2023, compared to (-) 0.3 per cent in September
2023. Food (raw food articles plus manufactured food) inflation decreased from 1.5 per cent in
September to 1.1 per cent in October. Inflation in manufactured products, though, increased from (-) 1.3
per cent in September to (-) 1.1 in October 2023 but remained in the deflationary zone.

17. In addition to measures already put in place, the Government of India has recently taken
a number of initiatives in specific food items that contribute significantly to the food basket and
are currently experiencing high inflationary pressures.

The Government recently flagged off 100 mobile vans for the sale of wheat flour (Atta) under the
‘Bharat’ brand. Under this, the wheat flour is available at an MRP not exceeding ₹27.5 per kg. This will
increase supplies in the market at affordable rates and will help in the moderation of prices. In order to
ensure continuous availability of onion to consumers at affordable prices, the Government raised the
quantity of onion buffer to 7 lakh metric tonnes in 2023-24. Onion from the buffer has been disposed of
continuously from the second week of August in major consumption centres all over the country. This
has been supplied to retail consumers at ₹25 per kg through 685 mobile retail outlets operated by NCCF
and NAFED. Recently, the Government of India imposed a Minimum Export Price (MEP) of USD 800
per tonne on Onion with effect from 29th October 2023 till 31st December 2023. As a result of all the
initiatives, the contribution of ‘select’ food items to overall inflation has declined from 60.6 per cent in
July to 53.6 per cent in October, with the corresponding contribution of vegetables declining drastically.

18. Apart from the policy measures of the Government, the steady monetary policy stance
of the RBI with adjustments in policy rates has also helped core inflation to progressively align
with the inflation target and support GDP growth.

Monetary Policy Transmission

Policy rate hikes continue to work their way through the economy

19. The Monetary Policy Committee (MPC) of the Reserve Bank of India (RBI) decided to
keep the policy repo rate unchanged at 6.5 per cent in its October 2023 meeting. The MPC has
indicated that monetary policy transmission to the economy’s broader borrowing costs is
incomplete. It noted that the cumulative 250 basis points (bps) hike is still working its way
through the economy and signalled that ceteris paribus, any further tightening of monetary
policy will likely occur only when transmission is closer to completion and if the situation
warrants it. The Weighted Average Lending Rate (WALR) on outstanding rupee loans is up by
105 bps over this period, while the WALR on fresh rupee loans is higher by 187 basis points.

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Since the advent of the current rate hike cycle in April 2022, the policy repo rate has been increased by
250 bps from 4 per cent to 6.5 per cent at the end of October 2023. The Weighted Average Lending
Rate (WALR) on outstanding rupee loans is up by 105 bps over this period, while the WALR on fresh
rupee loans is higher by 187 basis points. Within the outstanding floating-rate loans segment, monetary
policy transmission has been aided by an increase in the share of loans directly tied to the policy repo
rate. These external benchmark-based lending rate (EBLR) loans, which are characterised by a full pass-
through of any changes in the policy rates, account for over 50 per cent of outstanding floating-rate
loans as of June 2023, up from 9.1 per cent in March 2020. Loans priced off the Marginal cost-based
lending rate (MCLR), which comprised 78.3 per cent of this segment in March 2020, have seen their
share fall to 44.8 per cent in June 2023. Notwithstanding the above, the persistence of the difference in
WALRs and the policy repo rate implies that monetary policy transmission is partial.

Cumulative increase in key interest rates since May 2022

Repo rate Repo rate
300 WALR-Fresh Loans 300 WALR-Outstanding loans
WADTDR-Fresh Deposits WADTDR-Outstanding deposits
250 250

200 200
Basis points
Basis points

150 150

100 100

50 50

0 0
Apr-22

Dec-22

Apr-23
May-22
Jun-22
Jul-22
Aug-22
Sep-22
Oct-22
Nov-22

Jan-23
Feb-23
Mar-23

May-23
Jun-23
Jul-23
Aug-23
Sep-23
Apr-22
May-22
Jun-22
Jul-22
Aug-22
Sep-22
Oct-22
Nov-22
Dec-22
Jan-23
Feb-23
Mar-23
Apr-23
May-23
Jun-23
Jul-23
Aug-23
Sep-23

Source: RBI

Composition of Outstanding floating-rate Net interest margins of SCBs

loans by benchmark
MCLR EBLR Others 4
100

9.1 3.8
80
29.5 3.6
Per cent

60
Per cent

44
49.6 50.2 3.4
40
3.2
20
3
Jun-22

Dec-22

Jun-23
Mar-20

Mar-21

Mar-22

Sep-22

Mar-23

78.3 62.3 48.6 45.4 44.8

0
Mar-20 Mar-21 Mar-22 Mar-23 Jun-23
Source: RBI
Note: MCLR – Marginal cost of funds-based lending rate; EBLR – External benchmark-based lending rate;
The ‘Others’ category comprises of base rate, benchmark prime lending rate and other internal benchmarks.

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On the deposit side, the Weighted Average Domestic Term Deposit Rate (WADTDR) on fresh deposits
is up by 229 bps, while the WADTDR on outstanding deposits is up by 167 bps. It is notable that the
increase in the term deposit rates in this current rate-hike cycle has exceeded that in lending rates, both
in terms of fresh and outstanding loans/deposits. However, savings deposit rates have remained virtually
the same while current account balances earn no interest. This has enabled a lowering of banks’ overall
cost of funds, which is reflected in the rising net interest margin (NIM) of scheduled commercial banks
(SCBs).

20. The concurrent rate hike cycle across the globe is adversely affecting sovereign bond
yields. Bond yields are expected to remain elevated in the current situation of higher-for-longer
interest rates. However, Indian G-sec markets have remained relatively insulated, with yields
not responding in equal measure to the RBI’s tightening, as US treasury yields have to the
Federal Reserve rate hikes. India-US sovereign yield spreads have thus consistently narrowed
since the beginning of this tightening cycle, indicating a reduced risk premium between India
and the US. This is primarily due to the RBI’s relatively tighter control over inflation and the
Government of India’s commitment to fiscal discipline. A reduced risk premium implies that
the Indian Rupee is expected to face lower depreciation pressure in the coming months.

A combination of interest rate hikes and higher borrowings by the US government have led to a spike
in US treasury yields. The US 10-year treasury yield has increased by 330 bps over April 2021-October
2023. On the other hand, the India 10-year G-sec yield has increased by only 125 bps. This has led to a
narrowing of the spread by 205 bps.

Narrowing risk premium between India and US sovereign bonds

Spread (RHS) India 10-year G-sec US 10-year treasury
8 600

6
400
Basis points
Per cent

4
200
2

0 0
Apr-21

Jun-21

Apr-22

Jun-22

Apr-23

Jun-23
Aug-21

Oct-21

Dec-21

Feb-22

Aug-22

Oct-22

Dec-22

Feb-23

Aug-23

Oct-23

Source: Bloomberg

Youth and Female Employment: Insights from the PLFS Report 2022-23

21. The recently released Periodic Labour Force Survey (PLFS) 2022-23 highlights
improving employment among youth and females.

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Rising Youth Employment Coupled with Skill Development: Utilising the Demographic
Dividend

22. India’s demographic dividend is a stepping stone for sustained high growth and global
competitiveness in manufacturing and services. The decline in the annual youth unemployment
rate accompanied by greater youth participation in the labour force indicates better utilisation
of this dynamic resource. The rise in youth employment is also reflected in the formal
employment figures as per EPFO. The growth in youth employment has been coupled with the
progress in skill development, with nearly 1.4 crore candidates trained under PM Kaushal
Vikas Yojana since 2015. The recent launch of the Skill India Digital platform as the Digital
Public Infrastructure for the skilling, education, employment, and entrepreneurship ecosystem
marks another step towards the “ease of acquiring skill” in India.

According to PLFS, youth (age 15-29 years) unemployment rate has declined from 17.8 per cent in
2017-18 to 10 per cent in 2022-23, while youth LFPR has expanded from 38.2 per cent to 44.5 per cent
over the same period. Concurrently, the proportion of employed youth rose from 31 per cent to 40.1 per
cent in these six years.

Rising Youth (15-29 years) Employment Youth form the majority of new EPFO
subscribers
LFPR (RHS) Unemployment rate 18-28 years All Ages
150
20 45

120

90
in lakhs
Per cent
Per cent

10 40
60

30

0
0 35
2018-19

2019-20

2020-21

2021-22

2022-23

2023-24*
2017-18

2018-19

2019-20

2020-21

2021-22

2022-23

Source: PLFS Reports, NSO Source: EPFO (*FY24 data till Sep-23)

The annual new EPF subscribers belonging to the age group 18-28 years grew from 71.0 lakhs in 2019-
20 to 76.5 lakhs in 2022-23, i.e., by 7.7 per cent, quickly recovering from the COVID-19 shock in 2020-
21. Among the new subscribers in the EPFO payroll, nearly two-thirds have been from the 18-28 years
band. Relatedly, first jobs accounted for 47 per cent of the total net new payroll of 2.27 crore during
FY20 to FY23, according to a recent SBI Ecowrap report. Thus, youth employment has been rising in
tandem with the youth population.

The rise in the number of candidates undergoing skill development through the Government’s flagship
programmes has underlined the thrust to “Skill India”, as demonstrated in the figure above. The recently
launched Skill India Digital portal integrates various training programs of the Government by creating

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a centralised hub for skill development initiatives of the Central and State Governments. The across-
the-board progress in skilling has manifested in India’s rising position in WorldSkills Competitions,
held every two years.14

Skill Development under Flagship India at WorldSkills Competitions

Programmes
PM Kaushal Vikas Yojana
Jan Shikshan Sansthan Skills Participated (Nos) India's Rank
Apprenticeship Promotion Scheme 11
160 13
19
120
29
33
Lakhs

80
39 50
43
40
27 26
22
0 15
2015-16

2016-17

2017-18

2018-19

2019-20

2020-21

2021-22

2022-23

2011 2013 2015 2017 2019 2022

Source: MSDE 2010 MSDE Annual

Source: 2015 Report 2022-23
2020 2025

Rise in Female LFPR: Unfolding the Gender Dividend

Rise in Female LFPR driven by rural India

45 Rural Urban All India

35
Per cent

25

15
2017-18

2018-19

2019-20

2020-21

2021-22

2022-23

Source: PLFS reports, NSO

Note: for usual status, 15 years and above

23. From the gender perspective, the female labour force participation rate (FLFPR) has
been rising for six years-from 23.3 per cent in 2017-18 to 37 per cent in 2022-23, also
mentioned in the Economic Survey 2022-23. While urban FLFPR has also been rising, it is the
rural FLFPR which has witnessed a steep rise of 16.9 percentage points over the same period,

14
WorldSkills competition 2022 was conducted by WorldSkills International from September to November 2022
across Europe, North America, and East Asia, comprising over 1,000 competitors from 58 countries in 61 skills.

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indicating a rising contribution of females to rural production. This could be a culmination of

many factors, including continuous high growth in agriculture output and freeing up of
women’s time due to substantial expansion of access to basic amenities such as piped drinking
water, clean cooking fuel, sanitation, etc. On the other hand, the possibility of the rise in FLFPR
stemming from distress, emerging as a perception among commentators, does not hold ground
since distress-driven FLFPR should have peaked during COVID-19 and declined afterwards
instead of continuously rising since 2017-18.

Outlook

24. The government’s sustained investment push, healthy corporate profits, and a reduction
in bank non-performing loans will likely keep investment buoyant despite elevated input costs.
India’s exports are also expected to perform well, driven by strong performance in services
exports.

25. On the inflation front, the decline in international crude oil prices and continued
moderation in core inflation are likely to control inflationary pressures going forward.
Recognising this, RBI has also indicated that any further tightening of monetary policy will
likely occur when transmission is closer to completion and if the situation warrants.

26. With more than half of the current financial year witnessing positive developments in
the economy, the full financial year should conclude as projected with a strong growth
performance and macroeconomic stability. Yet risks on the downside persist. Inflation is one
of them that has kept both the government and the RBI on high alert. Financial flows in the
external sector also need constant monitoring as they impact the value of ₹ and the balance of
payments. A fuller transmission of the monetary policy may also temper domestic demand. On
balance, however, India’s growth experience in FY24 should continue to be a positive outlier
as compared to other major economies. In the medium-term, thanks to the sustained focus on
public investment in infrastructure and advances in digital public infrastructure, India can look
ahead to the prospect of a longer economic and financial cycle than in the past, subject to global
factors.

For feedback and queries, one may write to -mer-dea@gov.in

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Performance of High-Frequency Indicators

YTD Year to Date Year to Date (YoY Growth)

Period/As
Data Title Unit
at the end 2021-22 2022-23 2023-24 2021-22 2022-23 2023-24
of
Agriculture
Fertiliser Sales Mn Tonnes Apr-Sept 26.9 30.7 31.3 -13.9 14.1 2.0
Domestic Tractor Sales Lakhs Apr-Oct 5.6 6.1 5.9 7.7 9.8 -3.8
Rabi Sowing Mn Hectare 3-Nov 9.2 11.6 12.1 6.3 26.4 4.0
Kharif Production Mn Tonnes 1st AE 149.9 150.5 148.567 4.1 -0.4 -0.9
Reservoir Level Bn Cu. Metres 16-Nov 136 152.6 122.6 -4.0 12.2 -19.7
Wheat Procurement (RMS) LMT NA 433.4 187.9 262 11.2 -56.6 39.4
Rice Procurement (KMS) LMT 30-Sep-23 575.9 569.46 - -4.4 -1.1 -
Rainfall Millimetres June-Sep 874.5 925 820 -9.0 5.8 -11.4
Credit to Agriculture and allied
₹ Lakh crore Sep 13.8 15.6 18.2 10.6 13.0 16.7
activities
Industry
8-Core Industries Index Apr-Sep 130.3 143 154.1 16.9 9.8 7.8
IIP Index Apr-Sep 126.2 135.1 143.2 23.9 7.0 6.1
Domestic Auto sales Lakh Apr-Oct 96.5 121.6 135.1 4.4 26.1 11.0
PMI Manufacturing Index Apr-Oct 53.1 55.2 57.6 16.5 3.9 4.4
Power consumption Billion kWh Apr-Oct 821.2 905.4 983.1 11.4 10.3 8.6
Natural gas production Bn Cu. Metres Apr-Sep 16.9 17.2 17.9 21.0 1.7 4.0
Cement production Index Apr-Sep 147.1 163.3 182.1 37.8 11.0 11.5
Steel consumption Mn Tonnes Apr-Oct 588.1 659.4 756.6 28.0 12.1 14.7
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[Type here]

YTD Year to Date Year to Date (YoY Growth)

Period/As
Data Title Unit
at the end 2021-22 2022-23 2023-24 2021-22 2022-23 2023-24
of
Inflation
CPI-C Index Apr-Oct 161.9 173.4 182.9 5.2 7.1 5.4
WPI Index Apr-Oct 135.4 153.5 151.1 12.1 13.4 -1.6
CFPI Index Apr-Oct 161.8 174.2 185.7 2.9 7.7 6.6
CPI-Core Index Apr-Oct 161.1 171 179.3 5.9 6.1 4.8
Services
Average Daily ETC Collection ₹ Crore Apr-Oct 93.1 140.4 170.4 85.6 50.9 21.4
Domestic Air Passenger Traffic Lakh Apr-Sep 575 1242.7 1503.4 161.9 116.1 21.0
Port Cargo Traffic Million tonnes Apr-Oct 406.4 446.6 464.2 14.4 9.9 3.9
Rail Freight Traffic Million tonnes Apr-Oct 786.2 855.6 887.2 22.5 8.8 3.7
PMI Services Index Apr-Oct 51 56.9 60.5 54.3 11.4 6.4
Fuel Consumption Million tonnes Apr-Oct 111.3 126 133.2 7.4 13.2 5.7
UPI (Value) ₹ Lakh crore Apr-Oct 42 75 107.8 117.2 78.5 43.7
UPI (Volume) Crore Apr-Oct 2266.4 4435.5 7016.4 114.6 95.7 58.2
E-Way Bill Volume Crore Apr-Oct 42.5 53.8 64.2 43.1 26.6 19.4
Fiscal Indicators
Gross tax revenue (Central Govt) ₹ Lakh crore Apr-Sep 11.8 13.9 16.2 64.2 17.6 16.3
Revenue Expenditure ₹ Lakh crore Apr-Sep 14 14.8 16.3 6.3 6.0 10.0
Capital Expenditure ₹ Lakh crore Apr-Sep 2.3 3.4 4.9 38.3 49.5 43.1
Total Expenditure ₹ Lakh crore Apr-Sep 16.3 18.2 21.2 9.9 12.2 16.2
Fiscal Deficit ₹ Lakh crore Apr-Sep 5.3 6.2 7 -42.4 17.7 13.2
Revenue Deficit ₹ Lakh crore Apr-Sep 3.2 3.1 2.3 -58.6 -1.4 -25.6
Primary Deficit ₹ Lakh crore Apr-Sep 1.6 1.8 2.2 -73.4 13.3 18.8
GST Collection ₹ Lakh crore Apr-Oct 8.1 10.5 11.7 45.2 28.6 11.4

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[Type here]

YTD Year to Date Year to Date (YoY Growth)

Period/As
Data Title Unit
at the end 2021-22 2022-23 2023-24 2021-22 2022-23 2023-24
of
External Sector
Merchandise exports USD Billion Apr-Oct 234 263.3 244.9 55.4 12.5 -7.0
Non-oil exports USD Billion Apr-Oct 200 206.2 197 46.2 3.1 -4.4
Merchandise imports USD Billion Apr-Oct 328.1 430.5 392 76.4 31.2 -8.9
Non-Oil Non-Gold/silver imports USD Billion Apr-Oct 215.8 278.7 260.7 56.4 29.2 -6.5
Net FDI USD Billion Apr-Sep 20.3 19.6 4.5 -15.3 -3.2 -76.8
Net FPI USD Billion Apr-Oct 3 -7.2 14.7 -70.8 -338.8 -305.2
Exchange Rate INR/USD Apr-Oct 74.1 79 82.5 -1.1 6.7 4.4
Foreign Exchange Reserves USD Billion 03rd -Nov 640.9 530 590.8 12.7 -17.3 11.5
Import Cover Months Oct 14.4 8.9 10.4 - - -
Monetary and Financial
Total Bank Credit ₹ Lakh crore 03rd Nov 111.6 129.3 155.7 7.12 15.8 20.4
Non-Food Credit ₹ Lakh crore 03rd Nov 110.8 128.9 155.4 7.24 16.3 20.6
10-Year Bond Yields Per cent Apr-Oct 6.1 7.3 7.2 0.1 1.2 -0.2
Repo Rate Per cent 18th Nov 4 5.9 6.5 0 1.9 0.6
Currency in Circulation ₹ Lakh crore 10th Nov 29.9 32.2 33.6 7.6 7.7 4.3
M0 ₹ Lakh crore 10th Nov 37.2 41.3 44.2 12.4 11 7
Employment
Net payroll additions under EPFO Lakh Apr-Sep 52.5 71.6 85.2 176.7 36.5 18.9
Number of Persons demanded
Crore Apr-Oct 25.4 20.3 21.5 -7.3 -20.3 5.8
employment under MGNREGA
Urban Unemployment Rate Per cent Apr-Jun 12.6 7.6 6.6 -39.4 -39.7 -13.2
Subscriber Additions: National Pension
Lakh Apr-Aug 2.92 3.16 3.28 38.9 8.1 3.8
Scheme (NPS)

30