The GST Database Is a Gold Mine for Just-in-Time Policy Responses

Signals of shifts in economic trends far ahead of GDP data could prove invaluable for Indian policymakers and businesses

- ASHISH KUMAR & PAYAL SETH

In an economy as vast as India's, timing is everything. Policymakers need to know not just what is happening, but when. Yet, our most important measure of economic performance, gross domestic product (GDP), has a timeliness of two months to one year. Quarterly GDP figures arrive two months after the period they pertain to. By then, the ground reality may already have changed.

What if we could track the economy in near real time, with the same speed and detail that financial markets track stock prices? The data already exists; the goods and services tax (GST) system is a gold mine. It's time to tap this opportunity.

From tax collection to economic nowcasting: When GST was rolled out in 2017, it replaced a maze of central and state levies with a unified, multi-stage, destination-based tax system. This also created one of the richest data-sets in the country.

Each registered business has a GST identification number linked to its Permanent Account Number (PAN). For companies in the organized sector, PAN can be matched to the registration database of the ministry of corporate affairs (MCA) with the Corporate Identification Number (CIN) and National Industrial Classification (NIC) code, making it possible to connect GST data with a company's industry classification.

For the non-corporate sector, the GST system does not capture NIC codes directly; it only records the Harmonized System of Nomenclature (HSN) codes for goods and Services Accounting Code (SAC) for services. Unless a one-to-one mapping between NIC and HSN/SAC is established, industry classification for this segment will remain an approximation. GST returns, however, still record sales and purchases down to the invoice level, providing detailed product- and service-level data.