1 week ago
GST Divergence Raises Questions Over India’s Reported GDP Growth
India’s official figures say the economy grew strongly in the first quarter of FY27.
Systematix Group compared those figures with GST collections, which measure taxes linked to economic activity.
It found that GST collections grew much more slowly than reported value added.
The group therefore believes real GDP growth may have been about 3.7%, rather than 7.8%.
It also found that taxes from imports are growing faster than taxes from domestic activity.
This means imported goods and import-dependent businesses may be contributing more to collections.
Domestic GST growth has remained weak, which may show slower domestic value creation.
Manufacturing companies increased sales, but their raw-material costs rose even faster.
As a result, their calculated value added fell.
Systematix Group says GST growth in Q1 FY27 significantly lagged reported nominal GVA growth.
Adjusted GST collections rose 7.2% to ₹5.4 trillion, compared with reported nominal GVA growth of 11.5%.
The analysis estimates nominal GDP growth at about 6.2% and real GDP growth at approximately 3.7%.
Import-related GST grew much faster than domestic GST, raising its share of total collections from 18% to around 30%.
Manufacturing companies reported 24% sales growth, but 40% higher raw-material costs and a 4.5% decline in nominal value-added.
- Who
- Systematix Group, led in the cited statement by Dhananjay Sinha, analyzed GST, GVA, GDP and manufacturing data.
- What
- The analysis argues that GST trends indicate weaker underlying economic growth than official GDP and GVA estimates suggest.
- Where
- India.
- When
- The analysis concerns Q1 FY27 and compares data across periods including 1HFY25, 2HFY25 and 1HFY26.
- Why
- GST collections grew more slowly than reported nominal GVA, while import-related GST rose sharply and domestic GST remained subdued.
Official estimates
Systematix Group analysis
Real GDP growth
Official estimates
The official data cited in the article reports real GDP growth of 7.8% in Q1 FY27.
Systematix Group analysis
Systematix Group estimates real GDP growth at approximately 3.7%, based on the divergence between GST collections and reported GVA.
Nominal GVA growth
Official estimates
Official figures report nominal GVA growth of 11.5% in Q1 FY27.
Systematix Group analysis
The group says realistic nominal GVA growth may have been closer to 7.2%.
Economic strength
Official estimates
The reported figures indicate strong broad-based economic growth.
Systematix Group analysis
Subdued domestic GST growth and falling manufacturing value-added suggest domestic value creation may be weaker than the reported figures indicate.
Key facts
- Reported nominal GVA growth
- 11.5% in Q1 FY27
- Adjusted GST collections
- ₹5.4 trillion in Q1 FY27, up 7.2% after excluding GST compensation cess from the base year
- Estimated nominal GDP growth
- Approximately 6.2%, according to the Systematix Group analysis
- Estimated real GDP growth
- Approximately 3.7%, using a reported deflator of around 2.5%
- Import GST growth
- A 21% average growth rate over the five quarters ending Q1 FY27
- Domestic GST growth
- A 3.3% average growth rate over the same five-quarter period
- Manufacturing value-added
- Declined 4.5% year-on-year, from ₹5.59 trillion to ₹5.34 trillion, across 1,862 companies
Quotes
Dhananjay Sinha
CEO and co-head of Systematix Group
“Recent GST trends raise questions about the strength of India’s reported GDP and GVA growth. While nominal GVA growth was reported at 11.5% in 1QFY27, adjusted net GST collections grew by just 7.2%, suggesting underlying economic activity may be weaker than what official estimates indicate.”
deccanchronicle.com
Sources
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