New Delhi: Government Monday said revenue collection will fall short by Rs 50,000 crore but expressed confidence that economic growth will exceed 7.5 percent, with fiscal deficit remaining within the budgeted target.
"Our macro-fundamentals remain strong. We are now better placed to handle unforeseen external shocks and to put India firmly on the path of economic recovery and inclusive prosperity," Finance Secretary Ratan Watal said at a press conference along with other secretaries and the Chief Economic Advisor.
One of the concerns is revenue collection, which according to Revenue Secretary Hasmukh Adhia will fall short of the budgetary target by 5-7 percent, mainly because of subdued growth in direct taxes.
The total tax revenues are likely to be around Rs 14 lakh crore in the current fiscal, as against the budget estimate of Rs 14.5 lakh crore.
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As regards growth, Economic Affairs Secretary Shaktikanta Das said there are indications that it will exceed 7.5 percent in the current financial year.
"Despite the global slowdown and declining export demand, India has emerged as the fastest growing major economy in the world," said an official statement, adding that the government will continue to implement its reform agenda to realise potential growth rate of 8 percent plus over time.
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On the price situation, it said the "outlook for inflation is also good, as indicated by the RBI in its latest monetary policy review. Despite the uncertain monsoon, government food management, including use of the price stabilisation fund to augment domestic supplies with imports, will ensure that food inflation is contained".
The government and the Reserve Bank, Watal said, will work together to "consolidate the gains achieved in inflation control, through the inflation targeting framework and the associated institutional arrangements".
The retail inflation, based on the Consumer Price Index (CPI) is within the target zone, while Wholesale Price Index based inflation has been negative for 10 months in a row with core inflation showing signs of moderation, he said.
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The twin deficits - fiscal and current account - have been reduced, he said, adding "the government is committed to achieving this year's fiscal deficit target as well as the fiscal glide path laid out in the budget".
Observing that the revenue collection target for the current fiscal was 16.5 percent as against 9.9 percent in the previous fiscal, Adhia said, "in a way the target looks to be ambitious, but the revenue position so far has been very very satisfactory".
Direct tax collection during April-September registered an increase of 12 percent, he said.
As regards indirect taxes, the growth during April-August worked out to be 36.5 percent. It would be 12.2 percent after excluding the additional revenue measures by the government during the year.
The growth of 36.5 percent in indirect taxes is "quite satisfactory" he said, adding there is "likely to be some shortfall in direct taxes when we end up the year, but some part of it will be made good by indirect taxes because of the additional resource mobilisation measures.
"I am very hopeful that if there in no other externalities which comes in, we should be able to achieve our target. Only the shortfall may be not more than 7 percent...May be around 5 percent shortfall may be there," he said.
On the positive side, Adhia said that growth in indirect taxes was a reflection on increasing demand and economic activity.
"Goods are being sold, goods are being consumed, they are being imported, people are paying excise on it, the service tax is also showing some kind of buoyancy. So all this is looking good," he added.
With supportive policies in place, Watal said, "India is emerging as a strong growth driver for the world economy, capable of sustaining economic growth through its own momentum".
Based on a foundation of macro-economic stability, sizable foreign exchange reserves, and on creating the conditions for investment opportunities, the country is now better placed to handle external shocks.
To support the economy, he said, RBI has already announced a 50 basis points cut in the policy rate, bringing cumulative support of monetary policy to 125 basis points this year.
"This should boost confidence and investment, and help shore up corporate balance sheets. The government will play its part to ensure the benefits of accommodative monetary policy are transmitted to the economy at large," he added.
As regards expenditure management, Watal said that despite doubts being expressed by experts, government has been able to allocate 10 percent more resources to the states and increase plan expenditure by 30 percent so far in the current fiscal while adhering to the fiscal glide path.
The government, he further said, would move ahead with its subsidy rationalisation programme and was look forward to the the report of expenditure management commission to take more initiatives.
Headed by former RBI Governor Bimal Jalan, the commission is expected to submit its report by December end.
The Finance Ministry, Watal said has started preparatory work on 2016-17 budget two months ahead of the schedule with a view to firm up of policies for expediting necessary structural reforms to boost economy.
"We continue to work together on rationalising central sector schemes and programmes in run up to the Union Budget 2016-17. To give adequate time to the Ministries/Departments to reform their financial processes, this year the pre-budget exercise has been advanced by two months to ensure structural reforms on the expenditure side can be completed in time for the Budget," he said.
Elaborating on subsidy reforms, Watal said, "overall, expenditure on major subsidies as a percentage of GDP has come down from 2.5 percent in 2012-13 to 1.6 percent of GDP in 2015-16".
The government, he said, had taken various initiatives with regard to pricing of diesel and petrol and LPG was being sold at market prices throughout the country.
As regards fertilisers, he said, nutrient-based subsidy regime has been put in place for P and K fertilisers and neem coating has been made mandatory for subsidised urea to check its diversion for industrial use.
"Digitisation and Aadhaar seeding of PDS is being pursued all over the country to lay the foundation for next generation of PDS reforms along the lines of the JAM trinity outlined in the Economic Survey 2015-16," he said.
The government, he added, was trying hard to sort out legacy issues of tax demands "raised retrospectively through mutually beneficial solutions".
The broad approach, he said, has been to pursue non-adversarial tax regime, lower tax burden, reduce number of exemptions and simplify laws, rules and notifications.
The initiatives also include strengthening mechanisms for Advance Pricing Agreements, Authority for Advance Rulings and Settlement Commission and minimising direct interface of assesses with tax administration by promoting facilities of e-filing, e-processing, e-refunds etc.
The government, he said, is in the process of setting up a National Infrastructure Investment Fund that would help in channelising both domestic and foreign resources to satisfy the infrastructure needs of the economy.
Observing that infrastructure spending has picked up on the back of accelerated government spending on highways, railways and the power sector, he said, increase in capital expenditure is "beginning to crowd-in private investment, and the public private partnership projects which had stalled are also now picking up."
On power sector reforms, he said, much progress has been made over the last one and a half year as financial health of discoms has received the highest attention of the Government.
"We are working with the Power Ministry and the States to find a lasting solution to this problem, in a manner that ensures the gains of fiscal consolidation made over the 12th and 13th Finance Commission periods are maintained," he said.
Financial restructuring plan, he added, would incentivise discoms to generate more revenues, and close the gap between average cost of supply and revenue raised on sustained basis.
Watal also talked about the steps taken by the government in the past few months to support improvements in the functioning and profitability of public sector banks.
The initiatives, he added, were aimed at addressing both systemic and governance issues, which include laying out a road-map for a transparent and objective selection process for directors, separation of the post of non-executive Chairman and Managing Directors and recapitalisation of PSU banks.
The other initiatives include promotion of Pradhan Mantri Mudra Yojana (PMMY), under which 43.55 lakh loans have been disbursed by banks since April 2015, amounting to Rs 26,580 crore, with the sanctioned amount being Rs 28,496 crore, he said.
