The latest Goods and Services Tax collections have evoked mixed reactions. The collections in April, at ₹1.87 trillion, were at a record high.

Prime Minister Narendra Modi lauded the GST collection figure.

"Great news for the Indian economy! Rising tax collection despite lower tax rates shows the success of how GST has increased integration and compliance," Modi tweeted.

Independent analysts and media commentators quickly downplayed the record show. April collections are an aberration and will not set a new monthly trend, many commentators argued.

While the arguments presented by those looking at the glass half full are logical, policymakers and the markets could take the record GST collections as a win.

Or at least a great start to the year.

Come May, GST collections would slow when compared with April numbers, but the point is how much they would fall.

GST collections for the last two years were also boosted by growth rates of post-immediate pandemic years.

A meaningful comparison is difficult as both growth and inflation were impacted by the economy emerging from the pandemic lockdowns both in India and overseas.

A comparison of GST collections in 2019-20, before the pandemic hit, throws up encouraging data. It could be termed cherry-picking, but it could help with some guesstimations for 2023-24.

Monthly collections grew at an average of 48% in 2022-23 when compared with 2019-20.

And, this April, GST collections were 64% compared with the April 2019 number. The average for the year is unlikely to be very different from that of 2022-23.

The government's fiscal managers will take heart from these aspects when they project GST numbers for the remainder of the year.

• Inflation is expected to fall sharply from 2022-23, but the fall is inflation is mainly because of the high base. The underlying inflationary pressures will ease, but are unlikely to break significantly as demand conditions remain strong. To that extent GST collections may not ebb.
• April GST collection on a year or year basis is at a 12-month low as mentioned earlier. But, owing to the base effect, the numbers will increase from May on wards. This is because GST collections in April last year too saw a bump.

Apart from record GST collections, PMI (Purchasing Manager's Index) data shows that the Indian economy started well this fiscal. India's manufacturing PMI hit a 4-month high of 57.2 in April, and the country's services PMI hit a 13-year high of 62 during the month. The composite PMI is at 61.6.

GST collections and PMI are early indicators of how growth is faring.

Recent records suggest the government has been extremely conservative with its projections. Projections of growth and also of tax collections.

It is also turning out that macroeconomic variables aren't exactly playing out as the textbooks dictate when central banks raise interest rates. According to Federal Reserve Chairman Jerome Powell, the US economy will not be in a recession.

"That's not my own most likely case," he said after Fed raised interest rates for the 10th time since March 2022 to 5.00-5.25% on May 6.

On its part, the RBI expects the economy to grow 6.5% in 2023-24 on top of a 7.0% growth in 2022-23.

These are early days, and one month does not make a year. But GST collections and PMI data suggest that the economy has made a strong beginning to the year. And if the trend holds, there could be an upside to most projections on the economy and taxes. Markets will probably prefer to remain hopeful as earnings growth, too, is going strong.