[Editorial Analysis] Mixed signals: On September GST data

Mains Paper 3: Economy
Prelims level: GST data
Mains level: Indian Economy and issues relating to planning, mobilization of resources, growth, development and employment


• In these pandemic-hit times, when most economic news has been grim, the latest GST data give cause for some hope, albeit cautious, especially to policy makers overseeing beleaguered public finances.

• Gross revenue collections from GST scaled a six-month high of ₹95,480 crore in September, the first time in the current fiscal year when the tax receipts exceeded the year-earlier period’s figure.

Economic activity:

• Clearly, with lockdown restrictions having been significantly eased, economic activity appears to have regained some momentum as people strive to reclaim a semblance of normality and businesses rush to restock inventory ahead of the peak consumption season in festival-marked October and November.

• Other high-frequency indicators, including automobile wholesales and the survey-based Purchasing Managers’ Index (PMI) for manufacturing, both for September, reflected this push to build up stocks.

• The IHS Markit Manufacturing PMI reading was at its highest in more than eight years as accelerated increases in new orders and production buoyed the sector’s outlook.

• GST revenue from the import of goods was also marginally higher than in the year-earlier period, signalling that inward shipments of commodities used as inputs in manufacturing had inched up.

• Merchandise trade data from the Commerce Ministry show Indian purchases of metal ores and pharma products in September posted increases of almost 43% and 28%, respectively, appearing to correlate with the trend in GST.

Durability of trend:

• However, the 3.88% year-on-year growth in gross GST revenue must be seen in the backdrop of the fact that GST receipts had slid to a six-month low in September 2019 — a 2.7% contraction — as overall economic momentum slowed considerably.

• The key concern now would be to gauge the durability of the trend in GST collections, especially considering that over the first six months of the current fiscal, the cumulative revenue receipts are 25% lower year-on-year.

• Finance Minister’s annual Budget for 2020-21, announced in February before the pandemic and lockdowns pushed the economy into a record contraction, had projected a 12.8% growth in GST receipts, a goal that now seems surely impossible to realise.

• With the GST Council expected to meet today and attempts to resolve the contentious issue of GST compensation shortfall, Finance Ministry officials have their task cut out in trying to assess if their earlier projections of a ₹3-lakh crore shortfall in GST compensation would need to be recalibrated in light of the uptick in receipts.

• A reasonably accurate prognostication for the tax collection trend for the second half may well hold the key to untangling this logjam over the ways to fund the shortfall and the Centre-State trust deficit it has created.


• The latest GST data give cause for hope of a sustainable momentum in growth


Prelims Questions:

Q.1) With reference to the Ambedkar Social Innovation and Incubation Mission, consider the following statements:

1. Under Ambedkar Social Innovation Incubation Mission initiative, one thousand SC youth will be identified in the next four years with start-up ideas through the Technology Business Incubators in various higher educational institutions.

2. They will be funded 30 lakh rupees in three years as equity funding to translate their start-up ideas into commercial ventures.

Which of the statements given above is/are correct?
(a) 1 only
(b) 2 only
(c) Both 1 and 2
(d) Neither 1 nor 2

Answer: C

Mains Questions:

Q.1) The latest GST data give cause for hope of a sustainable momentum in growth. In this context what are the steps needed to enhance durability of the GST collection. Comment.

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