March 1, 2024

Lukmaan IAS

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DISSONANCE IN CONSUMPTION GROWTH ACROSS INDIAN STATES: GST REVENUES

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TAG: GS 3: ECONOMY

THE CONTEXT: The Goods and Services Tax (GST) revenue data for the first nine months of 2023-24 highlights varying consumption growth trajectories across different states in India.

EXPLANATION:

  • The analysis indicates disparities in consumption patterns, with specific states showing weaker growth in consumption, notably Gujarat, West Bengal, and Andhra Pradesh among others.

Concerns over Consumer Spending Trends and GST Revenue Analysis

  • The National Statistical Office’s estimation of private final consumption expenditure (PFCE) projecting a growth of only 4.4% for the year raised concerns.
  • This forecast accentuates worries about weakening consumer spending trends.
  • It marked the slowest growth since 2002-03, excluding the pandemic-affected year of 2020-21.
  • PFCE growth had previously surged to 6% in April-June 2023 but slid to 3.1% in July-September 2023 from below 3% in the latter half of 2022-23.
  • While GST revenues remained robust between April and December 2023, averaging ₹1.66 lakh crore a month and growing at 11.7%, State GST collections exhibited sharper growth at 15.2%.
  • Given that GST is a consumption-based tax, these figures serve as indicators of consumption trends within the economy.

Regional Disparities in State-wise GST Revenues

  • An analysis of State-wise GST revenue inflows revealed disparities among the 20 largest states, responsible for almost 97% of State GST collections.
  • Notably, Gujarat and West Bengal were the only large states with less than double-digit growth, while ten others saw growth rates lower than the national average of 15.2%.
  • In contrast, eight states, including Madhya Pradesh, Maharashtra, Karnataka, Haryana, Uttar Pradesh, Tamil Nadu, and Telangana, experienced robust growth in State GST revenues, ranging from 17% to 18.8%.

Implications on National Consumption

  • The variation in GST contributions from different states underscores the uneven nature of consumption across geographical regions, potentially explaining the subdued overall consumption growth in the country.
  • Improvements in consumption levels in underperforming states could significantly contribute to bolstering GDP growth and enhancing GST collections.

Factors Influencing Consumption Patterns

  • Factors such as tepid rural demand in states like Odisha, Rajasthan, and Chhattisgarh, stemming from weaker farm sector outcomes, could be contributing to slower GST revenue growth.
  • Additionally, the lack of substantial wage growth, especially negatively impacting lower-income households while rising for upper-income segments, remains a critical factor influencing consumption trends.

Broad-based Consumption Recovery

  • To sustain Private Final Consumption Expenditure (PFCE) growth, a broad-based recovery in consumption demand is necessary.
  • The current consumption demand primarily favours goods and services consumed by households in the upper-income bracket.
  • It calls for a more inclusive recovery that caters to households in the lower-income segment.

Varied Growth Among Smaller States and Union Territories

  • Analysis of GST revenue data among smaller states and union territories showcased higher-than-average growth rates.
  • Notably, Jammu and Kashmir witnessed a 29.8% surge, while northeastern states, including Manipur, demonstrated robust growth.
  • Mizoram (49.6%), Nagaland (35.8%), and Arunachal Pradesh (33.9%) also recorded significant growth in State GST revenues, highlighting disparities in consumption growth across diverse regions in the country.

MINISTRY OF STATISTICS AND PROGRAMME IMPLEMENTATION AND NSO:

  • The Ministry of Statistics and Programme Implementation came into existence as an independent Ministry on 15th October 1999.
  • It was the result of the merger of the Department of Statistics and the Department of Programme Implementation.
  • The Ministry has two wings, one relating to Statistics and the other relating to Programme Implementation.
  • The Statistics Wing re-designated as National Statistics Office (NSO) consists of the Central Statistics Office (CSO) and National Sample Survey Office (NSSO).
  • CSO is an attached Office and NSSO is subordinate Office under the control of Ministry of S&PI.
  • The Programme Implementation Wing has three Divisions, namely,

(i) Twenty Point Programme.

(ii) Infrastructure and Project Monitoring and

(iii) Member of Parliament Local Area Development Scheme.

Conclusion

  • The analysis of State-wise GST revenues presents a nuanced view of consumption growth disparities across Indian states.
  • Understanding these consumption patterns, influenced by factors like regional economics, wage trends, and rural demand, is crucial for devising policies aimed at achieving more inclusive and sustained consumption-led economic growth.
  • Addressing disparities and fostering a more broad-based consumption recovery could be instrumental in achieving higher GDP growth and enhancing overall economic stability.

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

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