Regaining Lost Momentum
The record Goods and Services Tax (GST) collection in the month of April is definitely a big success story for the Indian economy, after being hit hard by the Covid-19 pandemic. It shows that the Indian economy is fast regaining lost momentum and economic activities have once again started in full swing. GST collection of INR 1.6 lakh crore stands as a testimony to this fact, which is 20 per cent higher than the figure in April last year. Further, GST collection in industrialised states have also recorded double digit growth, providing ample indication that the sluggish manufacturing sector may soon contribute its might to the economy. As a matter of fact, the Manufacturing Purchasing Index (PMI) has risen to 54.7 in April from 54 in March, which highlights that since lifting of Covid-19 related restrictions manufacturing units have started working with renewed vigour. Another important aspect about the highest ever GST collection is that the ongoing geopolitical conflict has not been able to affect the Indian economy thus far. India’s neutral stand has ensured no shortage of energy and other essential commodities, for which the country is dependent on other nations. Another fact, which stands out from this success story is that more registered businesses are now paying taxes, which shows that law enforcing agencies are also doing a good job in respect to reviving the Indian economy.
However, it is still too early to claim that the Indian economy has been able to cross all hurdles within two years of contracting nearly 25 per cent. The economic balance still favours developed states, rather than small and marginal states, which are in dire need of funds to continue with its development and welfare activities. For example, while Uttarakhand has registered a growth of 33 per cent in GST collection, Manipur has witnessed a contraction of 33 per cent. This is not a healthy sign for the overall economic development of the country and GST collection figures have exposed the prevailing disparity between rich and poor states. The figures have shown that among the 30-odd states and Union Territories (UT) in the country, twenty have registered 14 per cent growth in GST collection and are in a position to achieve an overall higher growth rate, which may widen the gap between the rich and poor state further. The matter should be addressed urgently as lopsided growth may invite major domestic trouble like the 70s. Such a situation should be avoided at any cost. One possible way to avert such a situation is to modify the GST system with special emphasis to help the poor. It is known that unlike direct taxes, indirect taxes does not distinguish between the have and have nots. So both the rich and the poor are taxed at the same rate. To provide the poor much-needed relief from the uneven tax structure, rationalisation of GST rates is a must to bridge the gap. Only then, will India be able to write a unique success story.