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Expected GST improvement due to traction in economic activity: SBI Ecowrap

The expected improvement in GST collections will occur due to traction in economic activity during the festive month of November, said an SBI Ecowrap report on Thursday.

According to the report, November GST collections are expected to come in at a 10-month high of Rs 1.08 lakh crore as compared to Rs 1.05 lakh crore in October. “The Nov’20 collections will be very close to Jan’20 collections (Rs 1.10 lakh crore).

“The continued improvement in GST is mainly due to traction in economic activities and services in the festive month of November,” it said.

Besides, the report pointed out that 62.3 percent of incremental credit extended by the SCBs on a YoY basis was provided by the PSBs and 41.2 percent by the private sector banks, while the share of the foreign banks turned negative.

“A throwback into the past shows that in FY09, the share of PSBs in incremental credit was at 86.4 percent, while that of Private Sector Banks was 9.8 percent,” the report said.

“In the post-crisis period (FY09-FY14), the share of PSBs declined marginally to 79 percent, whereas for PBs, it jumped to 20 percent.

The report cited that post-FY14-FY20, the share of PSBs is at 30 percent, whereas that of PBs is at 55 percent with constraints in lending, lack of adequate frontloaded capital, and asset quality.

“Clearly, in the era of growth in pre FY08, it was an anomalous case of private sector growth with mostly public sector bank financing and currently in the era of no growth post-pandemic, growth will perhaps come back again with majorly public sector bank financing,” the report said.

In addition, the report highlighted that the yearly SBI Composite Index has now reached a 19-month high of 53.9 in November compared to 53 in October’20, and 50.8 in November’19.

“The monthly index touched the all-time high of 62.1 (High Growth) in Nov’20, compared to 59.3 (High Growth) in Oct’20 and 49.96 (Low Growth) in Nov’19,” it said.

“Based on the SBI index, we believe IIP & IIP manufacturing may grow 2-3 percent in Oct’20 and 3.5-4.5 percent in Nov’20. The SBI Business Activity Index, meanwhile, has jumped to the highest since March 9 for the week ended November 23.”

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