Low nominal Q1 growth results in fiscal pressures

On the fiscal side, the monthly data released by the CGA shows that the direct tax collections contracted by 1% in the first quarter of 2023-24

The critical information in the first quarter (Q1) gross domestic product (GDP) data relates to the proximity of real and nominal GDP growth rates at 7.8 per cent and 8 per cent, respectively. The implicit price deflator (IPD)-based inflation is only 0.2 per cent.  This phenomenon has repeated after fifteen quarters. With such a low nominal GDP growth, tax revenue growth is expected to be low. In fact, Centre’s gross tax revenues (GTR) have grown only by 3.3 per cent in Q1 and by 2.8 per cent during the first four months of the financial year ending March 31, 2024