0
0 items
No products in the cart.

GST revenues reveal a dissonance in consumption growth across States

Amid worries about weak consumer spending trends, Goods and Services Tax (GST) revenues for the first nine months of 2023-24 reveal a dissonance in consumption growth across States, with Gujarat, West Bengal and Andhra Pradesh among a dozen-odd States that are seeing weaker growth.

Last Friday, the National Statistical Office estimated private final consumption expenditure (PFCE) would grow just 4.4% this year, the slowest since 2002-03, barring the pandemic-affected year of 2020-21. After recovering to 6% in the April to June 2023 quarter from below 3% in the second half of 2022-23, the PFCE growth had slipped to 3.1% in the July-September quarter.

While GST revenues have been robust through April to December 2023, growing at 11.7% and averaging ₹1.66 lakh crore a month, State GST collections have grown at a sharper pace of 15.2%. As GST is a consumption-based tax that can broadly signal the consumption trends in the economy, Bank of Baroda economists distilled the State-wise GST revenue inflows so far this year to assess if there are regional disparities in the consumption story.

Among the 20 largest States that account for nearly 97% of State GST collections, two large States, Gujarat (9.5%) and West Bengal (9.8%) are the only ones to clock less than double-digit growth, while 10 others have grown at rates lower than the national average of 15.2%. On the other hand, eight States, led by Madhya Pradesh, Maharashtra, Karnataka, Haryana, Uttar Pradesh, Tamil Nadu and Telangana have seen State GST revenues rise in a range of 17% to 18.8%.

“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 bank’s economists concluded in a research note 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 bank’s researchers, led by chief economist, noted. In States like Odisha, Rajasthan and Chhattisgarh, where GST revenues have grown less than 11% so far this year, tepid rural demand due to weaker farm sector outcomes could have played a factor, they reckoned.

Lack of wage growth

India Ratings and Research economists flagged the lack of significant wage growth, which turned marginally negative for lower income households while rising 6.4% for their upper income counterparts in the second quarter of this year, as another critical factor 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,” the rating agency said.

Among the smaller States and union territories, most registered higher growth in State GST collections than the 15.2% national average. The erstwhile State of Jammu and Kashmir has clocked a 29.8% uptick, while all the north-eastern States, including strife-torn Manipur (17.5%), recorded robust 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 analysis of the Finance Ministry data.

Source from: https://www.thehindu.com/business/Economy/gst-revenues-reveal-a-dissonance-in-consumption-growth-across-states/article67716829.ece

Leave A Comment

Your email address will not be published. Required fields are marked *

Discover more from Khata Dekho

Subscribe now to keep reading and get access to the full archive.

Continue reading