The finance ministry on Monday said it expected the overalltax collections this financial year to fall five-seven per cent short of the Budget estimate, largely due to less-than-projected direct tax collections. This is despite the excise duty on petroleum products being raised, sops to the auto and capital goods sector being rolled back and service tax being increased in June.
Senior ministry officials were confident that the Centre’s fiscal deficit would be restricted to 3.9 per cent of gross domestic product (GDP) without expenditure cuts, a departure from the past few years.
The ministry said it remained confident of GDP growth of more than 7.5 per cent in FY16, though it would be less than the earlier projection of 8.1-8.5 per cent.
“There is likely to be some shortfall in direct taxes at the end of the year but some part of it will be made good by indirect taxes… The shortfall might not be more than five to seven per cent. Against the (Budget) target of Rs 14.5 lakh crore, we hope to achieve at least Rs 14 lakh crore, according to the current estimate,” Revenue Secretary Hasmukh Adhia said at a press briefing.
All secretaries of the finance ministry, as well as Chief Economic Advisor Arvind Subramanian, were present at the press conference, which came ahead of Finance Minister Arun Jaitley’s visit to Lima, Peru, to take part in a World Bank-International Monetary Fund meeting.
Tax collections of Rs 14 lakh crore would be 3.4 per cent lower than the Budget estimate.
Indirect tax collections have been robust, increasing 36.5 per cent between April and August. This could be attributed to measures such as a rise in excise duty on petroleum products in October last year, an increase in service tax from 12.36 per cent to 14 per cent in June this year and doing away with excise duty concessions to the auto and capital goods sectors in January 2015.
Finance Secretary Ratan Watal stressed the Centre’s fiscal deficit wouldn’t exceed 3.9 per cent of GDP.
“If I may say upfront, this year, from the expenditure point of view, we do not want to go in for over-rationalisation or what you might term expenditure cuts… I am confident the target will be achieved and, perhaps, the next year will also be good; the fiscal glide that has been envisaged will be sustained,” he said.
The expenditure management commission, he added, would come out with more suggestions, which the government would finalise by the year-end. “That exercise is going on. I believe some very good suggestions are going to be made about how you need not necessarily save by cutting; you can also save by better management of money,” he added.
On GDP growth for this financial year, Economic Affairs Secretary Shaktikanta Das said there were indications it would exceed 7.5 per cent.
“Despite the global slowdown and declining export demand, India has emerged as the fastest-growing major economy in the world,” read an official statement. It added the government would continue to implement its reform agenda to realise potential growth of more than eight per cent.
The Reserve Bank of India (RBI) has lowered its growth forecast for FY16 from 7.6 per cent to 7.4 per cent.
Chief Economic Advisor Arvind Subramanian said the government would review its 2015-16 GDP growth projections after data for the September quarter was released.
For the quarter ended June this year, GDP growth stood at seven per cent, against 7.3 per cent in the March quarter of 2014-15. The Economic Survey had estimated growth at 8.1-8.5 per cent in FY16.