Growth engine revving as GST, auto sales rise despite global roadblocks

New Delhi: India's economy ended the first quarter of FY27 on a strong footing with various high-frequency indicators showing robust growth in June, reflecting resilience despite the West Asia war and other external headwinds.

Gross goods and services tax (GST) collections rose 13.9% to Rs 1.95 lakh crore in June from the year before, closer to the Rs 2 lakh crore milestone, led by robust import-led revenues and higher compliance. Car sales grew 24% in June from a year earlier, and power consumption rose 11.6% to 166.5 billion units.

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UPI transaction volumes, a measure of economic activity, rose 23% year-on-year last month, while transaction value increased 20%.

To be sure, separately released data showed that India's manufacturing activity eased to a three-month low in June as growth in new business orders and export demand weakened, leading to softer output expansion. The HSBC Purchasing Managers Index fell to 54.2 in June from 55 in May. It was 58.4 in June 2025.

The central bank has cut its FY27 growth forecast to 6.6%, from the earlier forecast of 6.9%, citing elevated energy costs, the Iran-US conflict and supply chain disruptions. It expects first quarter expansion at 6.6%, second quarter at 6.3%, third quarter at 6.5% and fourth quarter at 6.8%.

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GST collections

Data released by the finance ministry showed that despite trade disruptions, June numbers lifted gross GST collections in the first quarter to Rs 6.32 lakh crore, up 8.4% from a year earlier.

The June mop-up, based on May transactions, came in the face of disruptions to global trade and supply chains due to the Gulf conflict, reinforcing the resilience of domestic economic activity.

"Double-digit monthly growth, compared to June 2025, is encouraging even though YTD growth is around 7%... The focus now should be on accelerating domestic economic activity and further improving compliance to sustain this momentum," said Pratik Jain, partner, Price Waterhouse & Co LLP. Gross domestic GST collections increased 6.5% to Rs 1.35 lakh crore from the year ago. GST revenue from imports surged 34.6% to Rs 60,038 crore. Refunds rose 29.1% to Rs 32,436 crore, taking net GST for the month to Rs 1.62 lakh crore, 11.2% higher than the corresponding period last year.

"While the West Asia conflict and its repercussions lasted longer than we expected, some signs of improvement are emerging with cooling crude oil prices. At the same time, the monsoon outlook looks bleak and we don't know how things will pan out," said Aditi Nayar, chief economist, ICRA.

While domestic collections during the quarter expanded a modest 2.8%, GST from imports recorded a sharp 26.2% growth, underscoring the increasing role of external trade in supporting indirect tax revenues. The June collection comprised central GST of Rs 37,376 crore, state GST of Rs 45,116 crore and integrated GST of Rs 1,12,320 crore, including taxes on imports.

Sustaining momentum

To be sure, separately released data showed that India’s manufacturing activity eased to a three-month low in June as growth in new business orders and export demand weakened, leading to softer output expansion. The HSBC Purchasing Managers Index fell to 54.2 in June from 55 in May. It was 58.4 in June 2025.

The central bank has cut its FY27 growth forecast to 6.6%, from the earlier forecast of 6.9%, citing elevated energy costs, the Iran-US conflict and supply chain disruptions. It expects first quarter expansion at 6.6%, second quarter at 6.3%, third quarter at 6.5% and fourth quarter at 6.8%.

“While the West Asia conflict and its repercussions lasted longer than we expected, some signs of improvement are emerging with cooling crude oil prices,” said Aditi Nayar, chief economist, Icra. “At the same time, the monsoon outlook looks bleak and we don’t know how things will pan out.”

Auto sales

Passenger vehicles despatched from factories to dealerships rose 24% to 400,000 units in June from 321,500 a year ago, industry estimated. They rose 27% in May and by 25% in April. The sales data include electric cars sold in the country.

Growth was buoyed by strong volumes at market leader Maruti Suzuki as well as Tata Motors and Mahindra & Mahindra (M&M), which saw sales grow by 24%, 67% and 28%, respectively.

Despite a week-long maintenance shutdown last month, Maruti Suzuki reported the highest-ever wholesales for any June, said Partho Banerjee, senior executive officer, marketing and sales.

“We are seeing strong traction both for our range of small cars and utility vehicles, even though there are some headwinds on account of the crisis in Iran and lower than expected monsoons so far this year,” he said. Demand for CNG vehicles was particularly strong last month, accounting for as much as 40% of total sales in June, Banerjee said.