Indian economy was poised for an encouraging double digit growth for the current fiscal of 2021-22. But the second wave of Covid-19 is spoiling the party. The rising number of Covid cases is ringing alarm bells as the current situation is forcing India to go for localised lockdowns or restricted movements and it'll affect the economic activity, economists voice concerns. After contracting 24 per cent in June quarter of 2020, worst-ever drop in the last 40 years, India's GDP is expected to close 2020-21 financial year with 8.5-10 per cent negative growth in GDP.
The World Bank recently raised India’s GDP growth projection to 10 percent in 2021-22 financial year. India’s economic growth in FY22 may be in the range from 7.5-12.5 per cent amid the challenges caused by the Covid-19 pandemic.
The 10.1 per cent forecast is 4.7 percentage points higher than the previous prediction by World Bank for India’s growth in 2021. The new projection reflects the pace of the country is in the path of recovery. However, the Bank also expects the Indian economy may contract by 8.5 per cent in FY21, higher than the centre’s own estimate of eight per cent.
International Monetary Fund (IMF) estimated that India’s economy will grow 11.5 per cent over 2021 and 6.8 per cent over 2022.
“Given the significant uncertainty pertaining to both epidemiological and policy developments, real GDP (gross domestic product) growth for FY21/22 can range from 7.5 to 12.5%, depending on how the ongoing vaccination campaign proceeds, whether new restrictions to mobility are required, and how quickly the world economy recovers,” said the World Bank in its report titled South Asia Vaccinates.
The World Bank further stated that “the main risks to the outlook include the materialisation of financial sector risks, which could compromise a recovery in private investment, and new waves of Covid-19 infections.”
Impact of Commodity Prices
Further, surge in global commodity prices will have a major effect on Indian economy which is still struggling to come out of the Covid-19 impact. Ratings agency Ind-Ra said that a higher retail inflation not accompanied by a commensurate increase in wage growth will adversely impact the consumption demand and in turn investment revival in the economy.
"Though a spike in global agricultural commodity prices could benefit India, it may not move the needle favourably because India, despite the world's biggest exporter of Basmati rice, exported just $6.59 billion worth of cereals and imported vegetable oil and pulses worth $9.66 billion and $1.44 billion, respectively in FY20. On the other hand, India's import bill on oil, coal and nonferrous metals was $129.86 billion, $22.45 billion and $13.14 billion, respectively," added Ind-Ra.
According to the agency, a faster-than-expected recovery in demand, the stimulus measures announced by the US, the roll out of Covid-19 vaccine and ultra-low interest rates are fuelling the surge in commodity prices.
Energy commodity prices in last six months rose by 55.4 per cent, the increase in non-energy commodity prices was 19.3 per cent.
Among the major non-energy subgroups, agricultural commodities rose by 16 per cent, fertilisers 30.2 per cent and metals and minerals by 25.1 per cent, said Ind-Ra.
On a more disaggregated level, the prices of copper, aluminium, tin, nickel and zinc have gone up by 26.3 per cent, 19.2 per cent, 46.6 per cent, 25.1 per cent and 12.4 per cent respectively. In addition, it warned against a commodity super cycle. This phenomenon occurs as a "long-term, above-trend movements in a wide range of base material prices, driven by a structural change in demand". The last such super cycle started in early 2000 and lasted till the global financial crisis of 2008.
Operational flexibility to GST filers
The central government has facilitated further flexibility to tax filers operating under the Quarterly Return Filing and Monthly Payment of Taxes (QRMP) scheme of GST. The GST tax filers are allowed to declare invoices pertaining to movement of goods and services in their quarterly return form GSTR-1 to be filed in the last month of each quarter.
As per an advisory issued by the Goods and Services Tax Network (GSTN), the taxpayer must ensure that any saved, but not filed/submitted IFF (Invoice Furnishing Facility) records for the first two months of the quarter i.e. month of Jan-2021 or Feb-2021 must be deleted using RESET button before filing GSTR-1 for Jan-Mar-2021 quarter.
According to a statement from GST Council, the deleted records should be added in GSTR-1 for Jan-Mar-2021 quarter after deleting the saved records from IFF. In future this may not be required as invoices already saved in any of the months on the quarter may be either deleted/moved to quarterly GSTR-1 by a functionality to be introduced shortly. The advisory also said that any submitted but not filed IFF for the month of Jan-2021 or Feb-2021 must be filed before filing GSTR-1 for Jan-Mar-2021 quarter. The advisory has been issued for filing quarterly GSTR-1 for January - March 2021 under QRMP scheme.
The taxpayers under QRMP scheme have a facility to file Invoice Furnishing Facility (IFF) in first two months of the quarter and file Form GSTR-1 in third month of the quarter. As IFF is an optional facility it cannot be filed after the end date (13th of the month succeeding the IFF period).
The document saved in IFF, where taxpayer has not filed by the end date, cannot be filed anymore. Hence taxpayers have a been asked to declare such document in the GSTR-1 for the quarter.