Chennai: The divergence between nominal GVA growth and GST collections growth in Q1 FY27 indicates that nominal GDP growth may be closer to 6.2% and real GDP growth would be approximately 3.7% and not 7.8 per cent as per the official data. The GST data also shows the growing dominance of import-related GST revenue and subdued domestic value-addition.
Historically, nominal GVA growth and GST collections have moved broadly in tandem, as GST is essentially a tax on value addition. In 1HFY25, GST collections grew by 9.3%, broadly matching GVA growth of 9.2%. In 2HFY25, GST growth was 8.4%, compared with GVA growth of 9.3%. In 1HFY26, GST collections increased by 8.9%, while GVA growth stood at 8.6%. This average growth of approximately 9% is also broadly consistent with the medium-term nominal GDP/GVA CAGR over seven years, finds Systematix Group.
The latest data, however, shows a significant divergence. The reported nominal GVA growth of 11.5% in 1QFY27, whereas GST collections of ₹5.4 trillion for the quarter grew by only 7.2% after excluding GST compensation cess from the base year.
“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,” said Dhananjay Sinha, CEO and co-head of Systematix Group.
Accordingly, realistic nominal GVA growth may be around 7.2% in 1QFY27 in the best-case scenario, rather than at 11.5%. The government’s own estimate of the GVA deflator is around 3.5%. If nominal GVA growth is assumed to be 7.2%, real GVA growth would be closer to 4%.
If nominal GVA growth is assumed to be 7.2%, nominal GDP growth may be closer to 6.2% after adjusting for the reported year-on-year decline of 0.4% in net indirect taxes. After applying the reported deflator of around 2.5%, real GDP growth would be approximately 3.7%.
Another significant insight from the GST data is the growing dominance of import-related GST revenue since FY25. Import GST grew at an average rate of 21% over the five quarters ending 1QFY27, significantly outpacing domestic GST growth of 3.3%. As a result, the share of import GST in total collections increased from 18% to around 30% in FY26 and FYTD27 (April-August) while for domestic it declined from 82% to 70%.
This shift suggests that a growing share of value creation is being captured by import- oriented sectors, including traders and import-intensive manufacturers, potentially benefiting from higher global commodity prices and leveraged consumption of imported goods.
At the same time, the stagnation in domestic GST collections indicates that domestic value addition has plateaued, challenging the narrative of broad-based strength in domestic economic activity.
A starker divergence is visible in the interim 1QFY27 results of manufacturing companies. According to CMIE’s compilation of 1,862 companies, net sales grew by 24 % year-on-year, while raw material costs surged by 40%, reflecting a broad-based increase in input costs.
As a result, nominal value-added declined from ₹5.59 trillion to ₹5.34 trillion a year ago, representing a contraction (-4.5% YoY). Given that unorganised businesses typically have fewer cost-management levers than organised companies, it is likely that unorganised manufacturing performed even worse than the contraction already visible in formal manufacturing.
Disclaimer : This story is auto aggregated by a computer programme and has not been created or edited by DOWNTHENEWS. Publisher: deccanchronicle.com
