One year after GST, urban consumers are better off
Consumers in five metros, namely Delhi, Bengaluru, Chennai, Kolkata and Mumbai, are paying less for a chosen basket of 71 items thanks to discounts
When the nationwide goods and services tax (GST) was introduced a year ago, it was accompanied by both fear and hope. The fear was that it would be used as an opportunity by firms to raise prices while the hope was that it would lead to a convergence of prices across states and cities. One year later, the evidence on GST is mixed. While prices have not gone up, the expected convergence has not materialized fully, an analysis of price data collated from online grocer BigBasket.com shows.
The analysis is based on 71 items representative of a middle-class shopping cart and drawn from 18 categories of the Consumer Price Index (CPI), the yardstick used to measure retail inflation.
The analysis shows that the price at which the basket of goods is being sold has fallen across cities. The fall in prices has been sharpest in Bengaluru followed by Chennai.
The decline in prices has largely been driven by a rise in discounts offered by the retailer (BigBasket), rather than a decline in the maximum retail prices (MRP) charged by companies. The rate of discounts has risen sharply over the past year, especially in Bengaluru.
The MRP of the grocery basket analysed rose in the first six months after the introduction of GST but has declined since then, during a period that saw some companies come under the government scanner for not passing on a reduction in tax rates.
Over the one-year period, the MRP of our basket has increased slightly for three of the five cities: Bengaluru, Delhi and Mumbai. It has declined slightly in the other two cities.
The analysis shows that the pre-tax value for most products—across cities and time frames—has mostly remained the same. The same holds true for GST rates. However, the markup charged by companies varies across cities and time frames, leading to consumers paying different amounts for the same product in different cities, and at different points in time.
One year after GST, the markup of our basket as a share of MRP is the same for three cities and has increased for two cities. Bengaluru recorded the highest increase, from 6% to 11%. It is only because of the higher discounts offered by BigBasket in Bengaluru that consumers there have not faced the brunt of the higher markups.
Among product categories, the increase in markup is the highest in spices (5% to 21%), followed by non-alcoholic beverages (7% to 15%) and personal care (8% to 12%). Cereals (9% to 6%) and household goods (7% to 4%) saw a decrease in markup.
One year after the introduction of GST, the promise of convergence in prices is yet to be met.
While product prices have converged across some categories, this is not true across categories. The GST promise of “one country, one price” is still a work in progress, the analysis shows.
howindialives.com is a database and search engine for public data.
- RBI governor Shaktikanta Das: Once bitten, second time lucky
- Detention of Nissan’s Carlos Ghosn extended through 20 December
- India to add 10GW of renewable power in FY20: ICRA
- Flipkart to invest in furniture, groceries; claims to be a market leader in e-commerce
- Shaktikanta Das, who oversaw demonetization, is new RBI governor
Editor's Picks »
- Reverse Pitch| “Out of 5,000 ventures, only 2% get showcased to our members”
- Congress wins Chhattisgarh by a landslide, puts an end to Raman Singh era
- Opinion| A comprehensive rejection of BJP by Chhattisgarh
- Opinion: Why Urjit Patel will not be missed as RBI governor
- Even the Raman Singh factor could not prevent the BJP debacle in Chhattisgarh
- Steel stocks get winter chill as China demand issues resurface
- Why Uday Kotak’s defiance is scaring his bank’s investors
- Exit RBI governor Urjit Patel, enter wrath of the markets?
- The government has a troubling message for minority shareholders
- Opec-allies’ output cut may not amount to big shift in oil prices