The value of the inter-state flow of goods in India increased to about 70% of GDP 2022 from nearly 55% of GDP in FY18, signalling increased economic integration among states after the goods and services tax (GST) was implemented According to a paper written by Bibek Debroy, chairman of the Prime Minister’s Economic Advisory Council (PMEAC).
The study, prepared by Debroy and his Officer on Special Duty Devi Prasad Misra for the Institute of Public Policy Research (IPPR), revealed that for domestically produced commodities, interstate trade flow accounted for roughly 35% of GDP in FY22, up from 23.5% in FY18.
Furthermore, it looks that internal trade is expanding at a rate that is more than twice as fast as GDP growth.
During FY18 and FY21, the nominal GDP expanded by 19.7% to $3,173 billion from $2,651 billion, while the value of domestic goods moved between states increased by 44% and the total value of imports and domestic goods movements increased by 34%.
The article notes that this is “in many respects symptomatic of the increased economic integration of Indian states as well (as) the transportation efficiency advantages that have accrued with the establishment of GST.”
By replacing a significant number of federal and state taxes and levies with the GST, which went into effect in India on July 1, 2017, the country was able to create a common market with little distortion and tax arbitrage, as well as administrative frameworks that enable regular reporting of tax information.
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