Weekly economy wrap: Tax collections rise, but inflation and trade gap bite

India’s economy this week saw stronger tax collections and exports providing support. However, rising inflation, a wider merchandise trade deficit and elevated government debt highlighted persistent macroeconomic pressures.

Amid controversy over the merchant discount rate (MDR), the government clarified that any future framework would apply only to a limited set of transactions. The week ended with Prime Minister Narendra Modi laying out a seven-pillar development roadmap for Viksit Bharat by 2047.

Direct tax collections rise sharply

Net direct tax collections rose 23.09 per cent year-on-year to over ₹8.11 trillion as of August 10, supported by stronger non-corporate tax and securities transaction tax collections.

Government debt remains above target

The government’s debt-to-GDP ratio stood at 58.2 per cent in FY26, 210 basis points above the 56.1 per cent target. It will need to decline by 260 basis points in FY27 to meet the Budget estimate of 55.6 per cent.

Retail inflation rises above RBI target

Retail inflation rose to 4.45 per cent in July from 4.38 per cent in June, remaining above the Reserve Bank of India’s 4 per cent target for a second consecutive month.

Wholesale inflation eases slightly

Wholesale price inflation moderated to 9.78 per cent in July from 9.87 per cent in June as fuel and power inflation cooled, though food inflation remained elevated.

Fitch retains India’s sovereign rating

Fitch retained India’s sovereign rating at BBB- with a stable outlook, citing the economy’s strong growth prospects. It, however, flagged fiscal risks, including the possibility of higher expenditure pressures.

Parliament clears banking records Bill

Government clarifies position on MDR

Finance Minister Nirmala Sitharaman said no MDR framework had been finalised. Any future levy would be restricted to limited merchant transactions above a specified threshold, while consumers and small merchants would remain outside its ambit.

Exports rise, but trade deficit widens

Merchandise exports rose 19.63 per cent year-on-year to $44.24 billion in July. Imports increased faster to $76.22 billion, pushing the trade deficit to a six-month high of $31.98 billion.

PM Modi outlines ‘Sapta Dhara’ growth roadmap

PM Modi outlined seven development pillars covering manufacturing, agriculture and food processing, technology, infrastructure, defence, the green and blue economy, and soft power as part of the Viksit Bharat 2047 roadmap.

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