Indian Economy Holds Steady as GST Collections Rise in August

India’s economy showed resilience in August, even as global trade headwinds and higher US tariffs loomed large. Latest high-frequency indicators point to steady momentum, underpinned by robust domestic demand and strong manufacturing activity.

GST Collections Edge Up

Goods and Services Tax (GST) revenues rose 6.5% year-on-year to ₹1.96 lakh crore in August. The figure was marginally lower than July’s collections, but ahead of June’s 50-month low of 6.2%. The average mop-up for the first five months of FY26 stood at ₹2.01 lakh crore, compared with ₹1.83 lakh crore a year earlier.

Domestic GST revenues grew 9.6% to ₹1.4 lakh crore, highlighting firm consumption trends, while collections from imports slipped 1.2% to ₹49,354 crore. Refunds were down nearly 20% to ₹19,359 crore. Net GST revenue rose 10.7% to ₹1.67 lakh crore.

However, state-wise growth presented a mixed picture. Large producing and consuming states saw subdued gains: Delhi (2%), Gujarat (3%), Rajasthan (4%), Maharashtra (6%), Karnataka (7%) and Tamil Nadu (8%).

Auto Sales Drag on Growth

The auto industry remained under pressure, with factory dispatches declining 7% to around 330,000 units in August, compared with 356,000 in the same month last year. This marks the fourth successive month of declining car sales, weighing on GST inflows.

Manufacturing and Power Demand Surge

Offsetting the weakness in auto sales, manufacturing activity surged to a 17-year high. Power consumption also rose 4.3% year-on-year, despite lower monsoon temperatures, signalling strong underlying industrial demand.

Economists Strike a Cautious Note

Sakshi Gupta, Principal Economist at HDFC Bank, noted: “Economic activity has held steady in the face of global tariff headwinds on account of both improvement in domestic consumption and frontloading of government expenditure.”

India’s GDP grew 7.8% in the June quarter, its strongest pace in five quarters, up from 7.4% in the preceding quarter.

But risks remain. Rajani Sinha, Chief Economist at CareEdge Ratings, warned: “Looking ahead, external headwinds, particularly tariff-related uncertainties, remain a key risk to growth.”

Aditi Nayar, Chief Economist at Icra, added that muted inflation readings for both WPI and CPI may also be tempering GST growth.