The Indian economy continued its momentum at the start of the second quarter, with high frequency data released on August 1 throwing some mixed signals.

Gross GST collections rose 10.3 percent to a three-month high of Rs 1.82 lakh crore compared with Rs 1.74 lakh crore in the previous month. Net revenue (minus the refunds) grew much faster at 14.4 percent indicating robust economic activity.

But manufacturing expansion eased at 58.1 in July compared to 58.3 in the previous month. In the first quarter of the year, manufacturing Purchasing Managers’ Index had averaged 58.2.

“India’s headline manufacturing PMI showed a marginal slowdown in the pace of expansion in July, but with most components remaining at robust levels, the small drop is no cause for concern," said Pranjul Bhandari, chief India economist, HSBC.

Favourable demand conditions helped keep employment levels high, but also pushed input costs higher with inflation galloping. Selling prices rose to the highest level in nearly 11 years, as per PMI data.

Rising cost pressures do not bode well for RBI’s inflation outlook, which rose beyond 5 percent in June owing to higher food inflation. The July numbers will be released on August 12.

The central bank will likely hold the policy rate at 6.5 percent for the ninth time at its meeting next week.

A high interest rate regime is likely to have an impact on consumer demand.

However, for now, consumer non-durables are performing well. Two-wheeler sales growth was in double digits at 19 percent in July for Bajaj, while Maruti recorded a 9 percent decline in sales for personal vehicles.

Honda Motorcycle & Scooter India (HMSI) recorded a 41 percent jump in domestic sales. Tata Motors witnessed a 6 percent decline in car sales.

However, there may be some respite, as Federal Reserve Chair Jerome Powell has hinted at the possibility of a rate cut in September.

On the digital front, there was good news, with UPI transactions remaining above Rs 20 lakh level for the third consecutive month. The transaction value rose to Rs 20.64 lakh from Rs 20.07 lakh in the previous month. Over the year, value was 35 percent higher, whereas volumes rose 49 percent.

But FASTag usage dipped compared to the previous month, even as it remained 9 percent higher from the similar period in 2023.

The Reserve Bank of India expects the economy to log a tad bit slower 7.2 percent growth in the second quarter compared to the 7.3 percent expected for Q1FY25.

The Indian economy had expanded 8.2 percent in the first half of FY24.

Coal output was 6.7 percent higher at 74.1 million tonnes. Coal production growth was also lower than the 10.6 percent push witnessed in the first quarter.

Rainfall was in 1.79 percent surplus at the end of July 31, indicating normal conditions for the country. However, there was wide variation across the country, which has kept kharif sowing contained.

Kharif sowing as of July 26 was only 2 percent higher than the previous year. Rice sowing was flat from the previous year, whereas pulses acreage was 14 percent higher.