June 10, 2023

There Is No Correlation Between Good GST Collection In November And Reversal Of Economic Slowdown

By Ashwini Agarwal

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GST collection for November have shown an increase of 8.5 percent and have crossed the Rs 1 lakh crore mark after three successive months of collections below Rs 1 lakh crore and two successive months of slippage. But there is not much that can be read into the increased collection about the revival of the economy. The simple fact is that collections in November were up due to sales of white goods, cars, garments and footwear, among other things, traditionally purchased by the people in the festival season of Durga Puja and Diwali which fell in October this year. It was also in part due to better compliance after easing of some the rules in the last meeting of the GST Council.

The collections for November this year were Rs 1,03,492 crore which was 8.5 percent more than the Rs 95,380 crore collected in October this year. After a collection of Rs 98,202 crore in August this year, September and October both saw negative growth. The GST collection in those months reflected the economic slowdown which was confirmed by other figures like plummeting sales of cars and two-wheelers and white goods. But the November figures are not an indication of the revival of the economy. We will have to wait for the collection figures for December and January to know about that. If those months also show positive growth, and if manufacturing shows an uptrend, only then can we say that the slowdown is being reversed.

We have seen that the last quarter showed growth dipping to 4.5%, the lowest in 6 years. Manufacturing activity in eight core infrastructure industries contracted by 5.8 percent. These are disturbing figures. Although they do not say that the economy has entered into a recession, they definitely point out that the measures taken by the government have not improved matters in the last quarter. Hence, instead of being buoyed by GST collections for November, the government should speed up the sale of identified PSUs including Air India and bring about further structural reforms.