With no headroom for proactive fiscal policy manoeuvring to kick-start the economy, Finance Minister Pranab Mukherjee, on Monday, pointed to a clutch of specific positives that would aid in a turnaround and pinned hopes on a normal monsoon and falling crude oil prices to catalyse a recovery in domestic growth momentum.
Striking a cautiously optimistic note in his address at the annual conference of the Central Board of Excise and Customs (CBEC) here — ostensibly to ward off a sense of gloom that has set in following the country's GDP (gross domestic product) growth plunging to a nine-year low at 6.5 per cent during 2011-12 — Mr. Mukherjee said: “… a normal southwest monsoon has been predicted for 2012-13 and there has been a rapid decline in international oil prices in recent weeks. Further, there are no major adverse results on corporate performance in the last quarter of 2011-12. All these factors should help in the recovery of domestic growth momentum.”
Positive indicators
To buttress his point, the Finance Minister also sought to highlight a few other positive indicators that would help the economy to get back on a higher growth track. “…there are some positives for the Indian economy as we look forward. The interest rate cycle has been reversed; mining sector growth has turned around; progress has been made on fuel linkage for coal based power projects; there is a turnaround in the quarterly investment growth rate, which had been negative in the preceding quarters of 2011-12,” he said.
Global uncertainty
Going into the genesis of the current economic crisis, Mr. Mukherjee argued that although the government's fiscal package by way of reduced excise and customs duties did dent revenue collections significantly in the recent past, it was ‘an unavoidable necessity' to steer the economy out of the slowdown in the wake of the global financial crisis of 2008. As a result, the Indian economy posted a healthy growth of 8.4 per cent in the next two fiscal years, 2009-10 and 2010-11.
However, in 2011-12, domestic business sentiments were impacted by renewed global uncertainty, emanating mostly from the eurozone area. “Like for most parts of the world, the second round of global uncertainty and the slowdown has come rather quickly on the heels of the previous one, with practically no headroom for running a proactive fiscal policy,” Mr. Mukherjee said, while pointing out that a tight monetary policy aimed at taming inflationary pressures also came in the way of consolidating the economic recovery, which is evident from the GDP growth in 2011-12 slowing down significantly to just 6.5 per cent. “This has been disappointing,” he said.
In the event, stressing that the fundamental requirement for a nation's economic development was a strong indirect tax administration, Mr. Mukherjee exhorted the CBEC officials to ensure that revenue collection targets are met and in time, but without harassing the tax-payer. “The challenges before your department today are multi-faceted ...The important task before you is to ensure timely collection of all legitimate tax dues, without, of course, unduly burdening the assessee,” he said. For this purpose, the Finance Minister advised taxmen to sharpen their audit skills and undertake scrutiny of assessees' records so as to fetch additional revenue through any tax that might have escaped assessment and also detect frauds that are often intelligently planned and executed. “While the need for trade facilitation and tax payers' satisfaction cannot be over-emphasised, any mala fide and corrupt practice to evade payment of legitimate dues needs to be handled as per established procedure of law,” he said.
Short of target
With the indirect tax collection (excluding cess), totalling Rs.3.93 lakh crore in 2011-12, which was only marginally short of the target set for the fiscal even in the wake of a slowdown, Mr. Mukherjee hoped that the CBEC would be able to achieve the target set for the current fiscal. The target for indirect tax collection, comprising excise, customs and service tax, for 2012-13 has been pegged at Rs.4,99,694 crore, an increase of about 27 per cent over the previous fiscal.
