Mohan, R. Kakarlapudi, Kiran Kumar and Ramakumar, R.
ST Reform, consumption behaviour, and revenues across INDIAN states - Economic & Political Weekly - 61(11), Mar 14, 2026: p.44-50
The demand- and revenue-side effects of goods and services tax rate reductions in India are examined, focusing on interstate heterogeneity in consumption behaviour. State-specific marginal propensities to consume are examined and corresponding consumption multipliers are derived to find substantial variation across states and an inverse relationship between MPC and per capita income. Linking these estimates to GST outcomes indicates that states with higher MPCs tend to exhibit greater GST buoyancy. Structural break tests on national consumption further highlight the limits of uniform GST rate rationalisation. Results suggest that growth and revenue implications of GST rationalisation and personal income tax concessions are likely to differ across states, with lower-income states benefiting more from consumption-led multiplier effects.-Reproduced
https://www.epw.in/journal/2026/11/special-articles/gst-reform-consumption-behaviour-and-revenues.html
ST Reform, consumption behaviour, and revenues across INDIAN states - Economic & Political Weekly - 61(11), Mar 14, 2026: p.44-50
The demand- and revenue-side effects of goods and services tax rate reductions in India are examined, focusing on interstate heterogeneity in consumption behaviour. State-specific marginal propensities to consume are examined and corresponding consumption multipliers are derived to find substantial variation across states and an inverse relationship between MPC and per capita income. Linking these estimates to GST outcomes indicates that states with higher MPCs tend to exhibit greater GST buoyancy. Structural break tests on national consumption further highlight the limits of uniform GST rate rationalisation. Results suggest that growth and revenue implications of GST rationalisation and personal income tax concessions are likely to differ across states, with lower-income states benefiting more from consumption-led multiplier effects.-Reproduced
https://www.epw.in/journal/2026/11/special-articles/gst-reform-consumption-behaviour-and-revenues.html