GST: The population factor

The tug of war over the Goods and Services Tax (GST) between the central government and state governments has raised questions on when this system of taxation—which collapses a multitude of taxes into one—will be implemented. When it does, it will change many things, one of which will be how much a state collects by way of taxing goods and services, something that is especially of concern to states with larger industrial bases but smaller populations.

That’s because the basis of GST is different from the basis of the two main taxes it will replace. The first main tax in the present system is excise levied by the Centre: a tax on production, it benefits states with larger industrial bases. The second is VAT (value added tax): a tax on sales levied by states, it benefits states with larger population and consumption.

However, since a company cannot set off the excise paid by it against VAT, states with a higher share of manufacturing collect and retain more taxes than states with a large population and consumption. Basically, the two taxes don’t talk to each other.

GST will change that as it will be levied at the point of consumption, and not production. Thus, prima facie, it will tilt the balance in favour of states with higher population and consumption, even if they don’t have a large industrial base.

So, with GST, which states stand to gain and which stand to lose? This realignment will play out at two levels. Graph 1 below maps three variables at the state level: population (red line), area (blue circle) and tax revenue (green line). The first two are also determinants to calculate a state’s share in GST.

Thus, at the first level, a downward sloping line is indicative of high population states (Uttar Pradesh, Bihar and West Bengal), and they are likely to benefit from GST. An upward sloping line is indicative of states with large industrial bases (Tamil Nadu, Maharashtra and Gujarat), and they could be impacted by the point of sale becoming the point of taxation.

But it’s also true that several states in India with the largest industrial bases (notably, Maharashtra and Tamil Nadu) also have a large population and are leaders in per capita income. So, what these states lose in the first-level shift from manufacturing basis to consumption basis might be offset by their own consumption quotient.

The scatter diagram in Graph 2 below plots similar variables as Graph 1 (with the added nuance of tax per capita). So, for example, while a state like Tamil Nadu might lose revenues because of consumption-based taxation, its high tax per capita, an indicator of higher consumption, would offset this.

The net impact of both factors will determine how much a state loses or gains when GST is implemented.

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The demographic number that binds cities in Bihar and Kerala

This piece originally appeared on Livemint.com

 

On nearly every socioeconomic indicator, these two states tend to sit on opposite ends of the spectrum. But there’s one where they sit side by side: their inability to hold on to their young with ample economic opportunities, shows an analysis of Census age data of 505 Indian cities and towns with a population of more than 100,000. At a broader level, this data is illustrative of the concentration of economic opportunities in India to select city clusters, raising questions about migration and livelihoods.

Concentration of economic opportunities

Of the 505 cities and towns with a population above 100,000, in only 30 does the 20-34 age group—the prime and potential of a workforce—make up more than 30% of their population. Maharashtra dominates this list, with 10 cities. Other than Maharashtra, only Gujarat, the Nationa Capital Territory (NCT) of Delhi and Tamil Nadu have more than one city in the top 20. Uttar Pradesh, the state with the most such cities and towns (64), has only one in this list; as do the next two states, West Bengal (61) and Madhya Pradesh (44).

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Maharashtra on one end, Bihar and Kerala on the other

Several industrial hubs, like Pimpri Chinchwad and Pithampur, feature in the 15 cities with the highest percentage of 20-34 year-olds. Four of the top 15 cities are from Maharashtra. In the bottom 15, Kerala has seven cities and Bihar has four.

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Even within states, there is wide variance

Bihar and Kerala are a distinct notch below other states in having a young population in their cities and towns. Although Maharashtra dominates the top, it also shows a wide variance, suggesting uneven development. Two other large states that show wide variance are Madhya Pradesh and Tamil Nadu.

 

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Bihar and Kerala

Although Bihar and Kerala are lumped in the bottom, there are nuances. While Bihar is primarily about urban migration caused by a lack of economic opportunities, Kerala’s numbers are also tempered by fertility rates that are lower and life expectancy that is higher than most Indian states.

 

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Urban migration without families

Most cities and towns with the highest percentage of 20-34 yearolds have lopsided sex ratios, which indicate that single men, or men leaving their families behind, are migrating to them for work.

 

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Among populous cities, Kolkata has the smallest percentage of the young

A majority of the 15 most populous cities have a middling to high percentage of 20-34 years in their population. Kolkata, Lucknow and Kanpur come in at the bottom of this list. In terms of sex ratio in this age bracket, most cities show a male skew, other than Hyderabad and Chennai.

 

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Notes: Data is for 2011, before Andhra Pradesh was bifurcated to form Telangana. In order to enable understanding and facilitate indicative comparison, city names have been stripped of their administrative Census definitions like municipal corporations, outgrowths, census towns, etc. So, for example, Bengaluru here represents the Greater Bengaluru metropolitan area, or Bruhat Bengaluru Mahanagara Palike (BBMP).

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Mapping India’s 640 districts by six types of religious faiths

This piece originally appeared on Livemint.com

 

Which two Gujarat districts have a Muslim population of above 20%? Where are the two clusters of Buddhist population? A data interactive that shows how India’s 640 districts were distributed by six types of religious faiths in 2011 and little has changed over 2001.

 

 

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News In Numbers – July 31

News In Numbers: July 31

 

7 years

India will become the world’s most populous nation, overtaking China, by 2022. By that time, the two Asian neighbours will have 1.4 billion people each. A report by the United Nations released two years back projected India to overtake China only by 2028. Population projection depends on fertility rates, which in turn is dependent on family planning. Countries that have high fertility rates are the ones that have low usage of modern contraceptive needs and high percentage of people not using any method of contraception.

67%

The percentage of rural households that use firewood and chips for cooking, underlining the stark disparity between urban and rural India. Around two-thirds of urban households use the smokeless, user-friendly and government-subsidised alternative, liquefied petroleum gas (LPG). Between 1993-94 and 2011-12, the proportion of households using LPG in urban areas has grown faster than in rural areas. As a result, the LPG subsidies have gone more into urban households. Last year, the average subsidy per LPG cylinder was Rs410. After a government appeal, more than 1 million consumers have voluntarily given up LPG subsidies.

Rs203.28 crore

The amount the company that runs online payment processor and marketplace Paytm will pay to the Indian cricket board for title sponsorship rights to all international and domestic matches to be played in India for the next four years. On a per international match basis, that works out to Rs2.42 crore, a 20% increase over the Rs2 crore paid by last title sponsor Micromax. For Paytm’s parent, the sum is 5.5% of the $575 million (about Rs3,600 crore) in funding—at the last valuation of $1.83 billion—committed by China’s Alibaba Group. Paytm is the first e-commerce company to bag these title rights.

49%

The government has allowed 49% foreign portfolio investment in multi-brand retail under the automatic route, in a significant departure from its earlier stand of not permitting external investment. The move is short of what international retailers like Walmart, Carrefour and Tesco are demanding, as these firms won’t be allowed to exert management control under the portfolio route. The Indian retail sector is fragmented with 12-15 million small stores. Together, they hold more than 90% market share in the estimated $534 billion market.

50,000

India’s top three software firms — TCS, Infosys and Wipro — added only 50,000 employees in their workforce in the 12 months ended June 2015. Though they hired 150,000 during the same period, attrition was also high. Industry body National Association of Software and Services Companies (Nasscom) has predicted a 6% hiring increase iin 2015-16 on a base of 3.5 million.

 

 

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