Jan 6: India’s Finance Ministry has delivered a challenge to its revenue collectors: meet tax targets despite $20 billion of corporate tax cuts.
Through a video conference on Dec. 16, officials were exhorted to meet the direct tax mop-up target of 13.4 trillion rupees ($187 billion), a government official told reporters. Collection in the eight months to November grew at 5% from a year earlier, against the desired 17%.
The missive shows Prime Minister Narendra Modi’s urgent need to buoy public finances in a slowing economy where April-November tax collections were half the amount budgeted. Authorities withheld some payments to states and have capped ministries’ expenditure as the fiscal deficit ballooned beyond the target.
The government’s efforts to maintain its deficit goal goes against advice from some quarters, including central bank Governor Shaktikanta Das, who urged more spending to spur economic growth.
It’s uncertain though how much room Modi’s administration has to boost expenditure, given that it may already be borrowing as much as 540 billion rupees through state-run companies, a figure that isn’t reflected on the federal balance sheet. Uncertainty about public finances pushed up sovereign yields in November and December, compelling Das to announce unconventional policies to keep costs in check.
“This is not a time to conceal the fiscal deficit by off-budget borrowing or deferring payments,” said Indira Rajaraman, an economist and a former member of the Reserve Bank of India’s board. “If they were to stick to the target, that would be catastrophic because there is so much pump-priming that is needed right now.”
GDP grew 4.5% in the quarter ended September, the slowest pace in more than six years as both consumption and investments cooled in Asia’s third-largest economy. Only government spending supported the expansion, piling pressure on Modi to keep stimulating.
S&P Global Ratings warned in December it may downgrade India’s sovereign ratings if economic growth doesn’t recover. Government support seems to be waning now, with ministries asked to cap spending in the final quarter of the financial year at 25% of the amount budgeted rather than 33% allowed earlier. This new rule will hamstring sectors including agriculture, aviation and coal, where not even half of annual targets have been disbursed.
As the federal government runs short of money, it’s been delaying payouts to state administrations.
Private hospitals have threatened to suspend cash-less services to government employees over non-payment of dues, while a builder informed the stock exchange about delayed rental payments from no less than the tax office itself.
India is considering a litigation-settlement plan that will allow companies to exit lingering tax disputes by paying a portion of the money demanded by the government, the Economic Times newspaper reported Saturday.
The move will help improve the ease of doing business besides unlocking a part of the almost 8 trillion rupees ($111 billion) caught up in these disputes. The step, which is being considered as part of the annual budget, could also bridge India’s fiscal gap.
Finance Minister Nirmala Sitharaman has refused to comment on the deficit goal before the official budget presentation due Feb. 1.
A deviation from target, if any, “will need to be balanced with a credible consolidation plan further-out,” said Radhika Rao, an economist at DBS Group Holdings Ltd. in Singapore.
Comments
Hegde is correct. He did not say that bjp has come to power to change indian constitution. He actual said that bjp is in the power to respect constitution and respect all the religions. Media twisted his statement. Hegde is a silent person as like his Go matha. He never says anything bad to others. He loves every one and respects all religions. He did not provocate the mob in Sirsi and Kumta who damaged private and govt perperty worth crores of rupees. Actually he was there to stop any voilence. He is ready to sacrifice his life to maintain peace n the society. He tried very hard to stop people from burning police car and commiting murderous attack on police. He even tried his best to stop people from posting rumours in whstasp and media that one Hindu girl was raped by gang of about 10 muslims boys and they even tried to kill her. He even asked Honnavar people not to make Paresh Mesta death issue a big one as it was planned by insiders only. Mr. Hegde is a follower of Mahatma Gandhi and he respects Bapuji very much. He cries on death anniversary of Bapuji and hates the killer Godse. He never visits Godse Mandir built by sangh parivar. Hegde is eligible person for next PM or President of India. He should be awarded with all kinds of awards ie. Padma Chakra/Padma Bhusan/ Padma shri for his noble nature and respect to all the citizens. He will be remembered by our generations to come. He will be a hero. His face itself shows how decent and nice person he is. He is ready to get slapped on face by any one and will never take revenge. He is follower of Jesus and will ask anyone who slaps on his right side to slap on left side also. Really he is a great person. Media is trying to defame him. I think whatever media doing against him is political motivated and his enemies are tryig to bring bad name to him.
He ate back what he vomited just because of the pressure by Patriotic Indian nationals. It is in their contaminated dirty blood that these anti-national communal Manuvadi Aryan parivar neither recognize nor respect Indian Secularism, Indian Constitution and Indian Flag.
shame on you Mr. AK Hegde.....
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