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GST Weighed on the economy of India


August, 03 2017
watermark Economic news

The status of businesses in India has suffered the worst scenario during the 2008 financial crisis, considering the rise in sales tax extensively that rattled the supply and distribution chains after months of implementing the cash ban on roiled markets by Prime Minister Narendra Modi.

Based on the report issued on Thursday, the Nikkei India Composite PMI Output Index shrink from 52.7 in June to 46 in July while the sharpest fall was March 2009. Activities in the services industry also decline to 45.9 from 53.1, which is the lowest since September 2013, after the data revealed the manufacturing had extremely dropped since 2009. A reading that is less than 50 reflects contraction.

According to a report, the principal economist at IHS Markit, Pollyanna De Lima said,  "Private sector activity dipped for the first time since the demonetization shock" and "most of the contraction was attributed to the implementation of the goods and services tax and the confusion it caused"

The mentioned data served as an indication of the underlying weakness in the country. On Wednesday, the Indian central bank decreased its interest rates to the lowest since 2010 and appeal to the government to boost projects due to "an urgent need" to improve private investment.

Most likely, companies are convinced that the outlook will become positive as the ruling of GST (Good and Services Tax) are being clarified, De Lima said.


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