New Delhi: India's supply chains were humming in July, with e-way bill generation, a key indicator of goods movement across and within states, hitting a record high of 131.9 million.

The surge was fuelled by a combination of factors: strengthening rural demand, pre-festive inventory stocking, and exporters potentially front-running shipments to the US ahead of a 25% reciprocal tariff taking effect 7 August.

Data from the Goods and Services Tax Network (GSTN), which processes GST returns, showed e-way bill generation rose nearly 26% year-on-year and 10.4% from June, marking one of the strongest monthly increases in recent memory.

"Since e-way bills represent the physical movement of goods within Bharat, a large increase in July, which is usually a monsoon month having slower movement of goods, could be due to the pickup in rural demand, as pointed out by various surveys," said M.S. Mani, Partner- Indirect Taxes at DeloitteIndia.

"Also an uptick in goods required for manufacturing exports, driven by the looming tariff increase scenario could have contributed," said Mani.

The trend is in line with the strengthening manufacturing activities in July indicated by a purchase managers' survey by S&P Global.

Its HSBC PMI index had climbed to a 16-month high due to faster increases in new orders, output and stocks of purchases. Its improvement from 58.4 in June to 59.1 in July signalled the strongest improvement in the health of the sector since March 2024, S&P Global had said earlier this month.

PMI trend also suggested strong jump in international demand in July while fresh orders declined from June, suggesting early clearance of shipments. Rising international demand from across the globe reportedly contributed to the overall upturn in total sales in July, but new export orders increased to a lesser extent than in June. The expansion was among the best seen in over 14 years, S&P had said on 1 August.

GST collections for July, reflecting June transactions, also pointed to buoyant trade. Revenue from imports rose 9.7% year-on-year, while domestic transaction revenue increased 6.7%. Higher imports are also associated with rising import of raw materials and intermediates that go into export production.

The 131.9 million e-way bills generated in July represent a significant signal of formal economic activity, said Rajat Mohan, Senior Partner at AMRG & Associates. This spike was likely driven by a combination of pre-festive inventory buildup, consistent compliance enforcement under GST and expansion in logistics and consumption cycles, said Mohan.

Mohan explained that it is important to note that US import tariffs are levied at the time goods enter and clear US customs, not when exported from India.

"Therefore, Indian exporters may have front-loaded shipments in July to ensure goods reached US ports before the new tariffs came into effect. However, such export-related movements constitute only a minor share of total e-way bill data, which is predominantly domestic. Thus, the e-way bill surge is primarily reflective of resilient domestic demand and improving supply chain efficiencies, rather than global trade shifts alone," added Mohan.

The Reserve Bank of India (RBI) has also flagged improving rural dynamics. The central bank had said last month that the farm sector remained strong, and that the outlook for agriculture and rural demand would be further supported by above-normal southwest monsoon rainfall.

Rural demand, it noted, remains steady, urban consumption is picking up, and investment activity is reviving. The RBI expects India's economy to grow 6.5% in both the September quarter and the full financial year.