Every Friday, Plain Facts delivers data-based insights, presented with clear charts, to provide deeper context to the week’s news. This week’s analysis reveals a concerning trend in India’s informal job market, the strengthening of trade ties between India and Russia, and a surge in mutual fund investments.
Shrinking Job Market
A recent government survey paints a concerning picture of the informal sector in India. Employment in this sector has declined over the past seven years, with a total of 109.6 million workers employed in 2022-23, down from 111.3 million in 2015-16. This decline is largely attributed to a contraction in the manufacturing sector, according to the Annual Survey of Unincorporated Sector Enterprises. However, there was an increase in employment in 2022-23 compared to the previous year, which saw 97.9 million workers in the informal sector.
India-Russia Trade Ties
At the 22nd Annual Bilateral Summit, India and Russia agreed to bolster their trade relationship, aiming to reach a target of over $100 billion by 2030. The two nations plan to achieve this goal through increased collaboration in energy, infrastructure, and agriculture, among other sectors. Since the outbreak of the Russia-Ukraine war, India has significantly increased its oil imports from Russia, jumping from $9.9 billion in 2021-22 to $61.4 billion in 2023-24. India’s overall trade with Russia stood at $65.7 billion in FY24, with exports accounting for a mere 7% of imports.
Mutual Fund Inflows Surge
Equity mutual fund investments witnessed a substantial surge from May to June, with investments reaching ₹40,608 crore in June. The assets under management (AUM) of equity mutual funds totaled ₹27.68 trillion. Systematic investment plans (SIPs) contributed a record-breaking ₹21,262.22 crore in June, exceeding the ₹20,904.37 crore recorded in May.
MGNREGS: A Continued Focus on Rural Employment
Despite the BJP’s declining popularity in rural areas, the government is unlikely to alter the ₹86,000 crore allocation for the Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS), as announced in the interim budget. However, the government remains open to increasing the allocation later in the year if deemed necessary. Historical figures indicate that the government’s actual spending on the scheme consistently surpasses the budgeted amount.
Streaming Platforms Embrace Ads
As revenue streams have dwindled, Netflix and Amazon, previously known for offering premium content through subscriptions, are shifting towards advertisement-supported plans. Netflix launched an ad-supported plan in November 2022 and recently decided to discontinue its cheapest ad-free plan in the UK and Canada. Amazon has also introduced advertisements for all Prime Video users, encouraging them to upgrade for an ad-free experience. This move coincides with a significant increase in digital video ad spending in the US, as reported by howindialives.com.
A Growing Appetite for Dining Out
The Indian food services sector is experiencing a remarkable growth trajectory, with estimates projecting a market size of ₹14.23 trillion by 2028, up from ₹5.69 trillion in 2024. This represents a compounded average growth rate of 8.1%. The sector encompasses catering and delivery services, and its expansion is fueled by the growing preference for dining out among millennials and GenZ.
Experts Advocate for GST Cut Over Income Tax Relief
While Indians are eagerly awaiting income tax relief in the upcoming Budget, experts believe that a reduction in Goods and Services Tax (GST) would be a more effective way to stimulate consumption in India. While income-tax cuts might offer immediate relief, they would benefit only a limited segment of the population. With 45% of the 1,455 goods still subject to an 18% GST, there is significant scope to reduce this indirect tax, benefiting all Indians.
Chart of the Week: Rising Inflation
India’s retail inflation is projected to rise for the first time in six months, driven by a 4.9% increase in vegetable prices in June compared to 4.75% the previous month. If the inflation data aligns with these expectations, it will mark the highest level in four months.
