The severity of India's economic crisis is evident when quantified

The real growth in average incomes is slower than that in consumption and investments, and the nominal growth in company tax collection is slower than growth in nominal incomes, data shows

The Indian economy took a body blow in the ongoing Covid-19 pandemic. The crisis has now made way for recovery, and India was not alone in facing it. 

However, one thing sets India apart from most emerging peers and advanced economies: The fact that the country was undergoing a severe economic slump even before the pandemic. Much has been talked about the slowdown, and how it followed demonetisation and GST implementation. 

Here, we divided the last two decades and a few more years in four-year chunks to see how incomes, consumption, investments and tax collection has grown over the period. 

The 2018-2022 will see average per capita income, private consumption and investments to grow slowest in real terms—nominal growth adjusted for inflation. But more importantly, real per capita incomes have consistently grown slower than consumption and investments. 

In the 2018-19 to 2022-23 period, real per capita income of India will grow only six per cent, a dent never experienced before in decades. Real Consumption growth was rising gradually, but it got hit with a severe shock in the most recent period. So much that investments will be growing faster than consumption.

Now, average per capita income (represented by the net national income divided by the mid year population for that year) usually represents the situation of low income earners as the majority of Indians fall under that income profile. The incomes of the well off can be gauged from taxes collected on personal incomes and company profits. 

Average incomes have grown considerably slower than direct tax collection in India for the past two decades. Now, both are growing much slower than before. 

But more importantly, there seems to have surfaced some kind of parity between the three, such that their nominal growth is now in the comparable range. 

Even though corporation tax collection has shown record growth this year, growth over a four year period pales in front of average income growth. According to Budget estimates and using the historical tax data, corporation tax collection will show only 9 per cent growth from 2018-19 to 2022-23. Corporation tax was cut in 2019. 

Income tax growth has not fallen to these levels. 

Assumptions

Four-year periods that do not clearly represent distinct political regimes are considered to avoid any correlation between growth and political leadership. The consumer price index for rural labourers has been considered the price inflator. CPI-RL for December 2021 is the latest available, and has been considered as the representative index for the end of 2021-22. If at all, this would only be at the lower end of actual price rise that will happen till March 2022. Further, CPI inflation for rural labourers has been considered at 4.5 per cent in 2022-23, based on Reserve Bank of India’s latest assessment (February 2022) for CPI General Index. For 2022-23, net national income is assumed to grow by 11 per cent, based on the Union Budget’s assessment that nominal gross domestic product will grow 11.1 per cent in FY23. Private final consumption expenditure and Gross Fixed Capital Formation is assumed to grow by 7 per cent in FY23 based on the pre-slowdown trend.