India’s low exposure to China has saved the day for manufacturers for now, but it is still early days to rejoice. The official manufacturing Purchasing Managers’ Index (PMI) held up at 54.5 in February, just slightly lower than the 55.3 recorded in January. The numbers suggest that manufacturing operations are improving, which is quite heartening in a weak global economy.
But much of this is because New Delhi remains insulated from Beijing as India’s exports to China constitute about 5% of its total exports. So while a few Asian countries managed to buck the trend, March may still twist the narrative if the global economic conditions worsen.
“The impact of Covid-19 (coronavirus) remains uncertain and could hit us hardest in March. The sharp drop in China’s manufacturing PMI in February and likely production outage in India’s auto industry indicates an impact is pending,” economists at Axis Capital Ltd said in a note to clients.
Besides, goods and services tax (GST) collections of February are hardly signalling a revival in gross domestic product. In fact, GST collections slipped to ₹1.05 trillion in February against the government’s target of ₹1.15 trillion. Month-on-month collections were lower by about ₹6,000 crore.
However, GST return filers have increased. About 8.35 million returns were filed in February against 8.1 million last December. Besides, this suggests that while compliance is improving with a rise in returns filed, actual business activity for companies may have contracted.