08.04.2023: Interstate flow of goods rose to 70% of GDP post-GST implementation

The value of the inter-state flow of goods in India increased to about 70 per cent of GDP in FY22 from nearly 55 per cent in FY18, taking into account movements of domestic and imported goods, shows a paper authored by Bibek Debroy, chairman of the Prime Minister’s Economic Advisory Council (PMEAC), signalling increasing economic integration among states after goods and services tax (GST) was introduced.

The paper, published by the Institute of Public Policy Research (IPPR), and written by Debroy, along with his Officer on Special Duty Devi Prasad Misra, found for domestically produced goods the inter-state trade flow amounted to about 35 per cent of GDP in FY22, up from 23.5 per cent in FY18.

Further, internal trade appears to be growing at more than twice the pace of growth of GDP.

In the four-year period, FY18 to FY21, nominal GDP grew 19.7 per cent to $3,173 billion from $2,651 billion, whereas the value of domestic goods transported among states increased 44 per cent, and the cumulative value of imports and movements of domestic goods increased 34 per cent.

“In many ways, this is indicative of the transportation efficiency gains that have accrued after the introduction of GST, as well (as) the enhanced economic integration of Indian states,” the paper reads.

GST, introduced in India on July 1, 2017, replaced a large number of national and state-level taxes and levies, thereby not only uniting India into a common market with minimal distortion and tax arbitrages but also putting in place administrative structures that provide for a regular reporting of tax data.

Source: Business Standard 

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