While GST revenues have been strong by April to December 2023, rising at 11.7% and averaging ₹1.66 lakh crore a month, State GST collections have grown at a sharper tempo of 15.2%.
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| Photo Credit: PTI
Amid worries about weak shopper spending traits, Goods and Services Tax (GST) revenues for the primary 9 months of 2023-24 reveal a dissonance in consumption growth across States, with Gujarat, West Bengal and Andhra Pradesh amongst a dozen-odd States which might be seeing weaker growth.
Last Friday, the National Statistical Office estimated personal closing consumption expenditure (PFCE) would develop simply 4.4% this yr, the slowest since 2002-03, barring the pandemic-affected yr of 2020-21. After recovering to six% in the April to June 2023 quarter from under 3% in the second half of 2022-23, the PFCE growth had slipped to three.1% in the July-September quarter.
While GST revenues have been strong by April to December 2023, rising at 11.7% and averaging ₹1.66 lakh crore a month, State GST collections have grown at a sharper tempo of 15.2%. As GST is a consumption-based tax that may broadly sign the consumption traits in the financial system, Bank of Baroda economists distilled the State-wise GST income inflows to date this yr to evaluate if there are regional disparities in the consumption story.
Among the 20 largest States that account for almost 97% of State GST collections, two massive States, Gujarat (9.5%) and West Bengal (9.8%) are the one ones to clock lower than double-digit growth, whereas 10 others have grown at charges decrease than the nationwide common of 15.2%. On the opposite hand, eight States, led by Madhya Pradesh, Maharashtra, Karnataka, Haryana, Uttar Pradesh, Tamil Nadu and Telangana have seen State GST revenues rise in a vary of 17% to 18.8%.
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“Gujarat, West Bengal, Delhi and Odisha are among the top 10 GST contributors where growth was slower, while eight States have driven the overall collections with growth higher than the national average. This is indicative of consumption being uneven across geographies… and may explain why overall consumption in the country has not been growing at a higher pace,” the financial institution’s economists concluded in a analysis word on variations in State GST collections.
“Quite clearly, an improvement in consumption across some of the States that are lagging today will help boost both GDP growth and GST collections,” the financial institution’s researchers, led by chief economist Madan Sabnavis, famous. In States like Odisha, Rajasthan and Chhattisgarh, the place GST revenues have grown lower than 11% to date this yr, tepid rural demand resulting from weaker farm sector outcomes might have performed a issue, they reckoned.
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Lack of wage growth
India Ratings and Research economists flagged the dearth of great wage growth, which turned marginally detrimental for decrease earnings households whereas rising 6.4% for his or her higher earnings counterparts in the second quarter of this yr, as one other important issue for consumption growth.
“Ongoing consumption demand continues to be an area of worry as it is skewed in favour of goods and services consumed largely by households belonging to the upper income bracket. For sustained PFCE growth, recovery in consumption demand has to be more broad-based where by a significant contribution comes from goods and services consumed by households in the lower income bracket as well,” stated Sunil Kumar Sinha, the ranking company’s principal economist and senior director (public finance), in a word co-authored with senior analyst Paras Jasrai.
Among the smaller States and union territories, most registered larger growth in State GST collections than the 15.2% nationwide common. The erstwhile State of Jammu and Kashmir has clocked a 29.8% uptick, whereas all of the north-eastern States, together with strife-torn Manipur (17.5%), recorded strong growth. State GST revenues grew 49.6% in Mizoram, 35.8% in Nagaland, and 33.9% in Arunachal Pradesh, as per Bank of Baroda’s evaluation of the Finance Ministry knowledge.
