​Unenviable choice, Pg6

Key Highlights:

• GST revenue reached ₹1.74 lakh crore in December 2025, reflecting November's economic activity under reduced GST rates.
• Total tax revenue stood at ₹13.9 lakh crore at the end of November 2025, a 3.4% decrease compared to the same period in 2024-25.
• Centre's capital expenditure increased to ₹6.58 lakh crore in April-November 2025, 28% higher than the previous year.
• New excise and GST rates on tobacco products, along with a health and security cess on pan masala, will take effect on February 1.
• Wholesale inflation averaging -0.08% has reduced the size of the nominal GDP, impacting fiscal deficit and debt-GDP ratios.

Detailed Insights:

• Reduced GST rates and income-tax rejig, while welcome, are expected to cause short-term fiscal challenges for the government.
• People are more likely to save or reduce debt with extra money from tax relaxations, leading to a medium-term increase in consumption.
• The government's revenue expenditure, including salaries, pensions, and interest on loans, has limited scope for reduction.
• Low wholesale inflation has led to a smaller nominal GDP, causing the fiscal deficit and debt-GDP ratios to be larger than estimated.
• The government faces the difficult choice of reducing capital expenditure or risking failure to meet its fiscal targets.

Key Concepts Involved:

• Goods and Services Tax (GST): An indirect tax levied on the supply of goods and services.
• Fiscal Deficit: The difference between the government's total revenue and its total expenditure.
• Capital Expenditure: Funds used by a company to acquire or upgrade physical assets.