Tax Mop Up May Stagnate But All Is Well

Government is all bullish about Indian economy and quite overwhelmed about the state of economy in first six month of the current fiscal, as India emerged “fastest growing” major economy in the world. Upbeat with the growth during the first half of the economy, finance ministry has predicted 8% plus growth during FY16 as reform agenda would be pushed further in coming months. Top secretaries of Ministry of Finance, while indicating towards plans of spending more money towards infrastructure, highways, railways and power sector, said that capex would be increase by more that 30% during current fiscal.

Led by Ratan P Watal, Finance Secretary, all secretaries of finance ministry reviewed the first half performance yesterday and  were seemingly satisfied with the way Indian economy fared during FY16. “While the Government continues to implement its reform agenda, the economy should over time realize its 8 percent plus growth potential. With supportive policies in place, India is emerging as a strong growth driver for the world economy, capable of sustaining economic growth through its own momentum,” Watal said in a press conference

Despite this enthusiasm, biggest worry for the government remain the tax mop up, especially the direct tax collection that remained subdued during the year. It has been estimated that there may be a minor shortfall of 5% in the tax collection target of Rs14.5 lakh crore, but ministry is still hopeful of achieving the total taxation target. “The tax collections figure can be taken as a positive index of growth in demand in the economy,” secretary quipped.

While showing their satisfaction over the interest rate cut by RBI during the current year by around 125 basis points, Shaktikanta Das, Secretary, Department of Economic Affairs (DEA) said; “This should boost confidence and investment, and help shore-up the corporate balance sheets. The Government will play its part to ensure the benefits of accommodative monetary policy are transmitted to the economy at large.” Biggest respite for the government remained the low level of inflation. Inflation has been decisively brought down: the headline CPI inflation is within the target zone, WPI inflation has been negative for ten consecutive months, and core inflation has shown signs of moderation too. “Government and the RBI will work together to consolidate the gains achieved in inflation control, through the inflation targeting framework and the associated institutional arrangements,” marked Dr Arvind Subramanian, Chief Economic Adviser (CEA)