JOIN USThe reporting of a high gross collection of Goods Services Tax (GST) for the month of October is a positive for the economy which has nosedived for months, with the Covid-19 pandemic disrupting every sector of it, aggravating a slowdown which was already weakening it. The Rs 1.05 lakh crore revenue is an eight-month high, and it is 10% higher than the collections over the same period last year. The September revenues at Rs 95,000 crore were also more than the previous month’s collections. These may signal a rise in consumption and of demand. There are signs of better performance on the production side also with Nikkei’s manufacturing purchasing managers index (PMI) rising to 58.9 in October, which was the fastest expansion in factory output in over a decade. The index of eight core industries in September registered the same level as last year. The monthly sales data for the auto sector and fuel consumption has shown an uptick. Railway freight revenue has started showing an increase. The quarterly results announced till now of some listed companies have also shown promise.
But it may be too early to consider these as signs of the economy turning around after its sharpest fall in many decades. The steepness of the fall itself has something to do with the recovery seen now. A part of the increase in GST collections may be attributed to the September 30 deadline for input tax credit. The gradual reopening of the economy after the easing of lockdowns in September and October may have led to the release of a part of the pent-up demand of the previous months. Festival demand, which every year gives a boost to the economy during these months, could have accounted for a good part of the high collections. But It is difficult to predict that the trend will sustain in the coming months. There are warnings about the pandemic making another surge in the coming weeks, and that may lead to more disruptions of the economy.
The sighting of the green shoots should therefore be taken with some caution. It may not be right for individuals to make financial decisions and governments to formulate policy on the basis of indicators available now. But individuals, organisations, businesses and governments can help the economy by spending as much as they can. The government, in fact, has a greater responsibility in this respect. Despite suggestions from all quarters that it should spend more and facilitate more spending in order to stimulate more demand in the economy, its response has been timid. The packages that it has announced have not gone far enough, and there is a need for more stimulus.