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Updated: June 12, 2012 16:10 IST

Normal monsoon and falling crude prices to catalyse recovery: Finance Minister

Special Correspondent
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Union Finance Minister Pranab Mukherjee. File photo
The Hindu Union Finance Minister Pranab Mukherjee. File photo

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.

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Still government relaying on the external enverionment factors for the recovery of economy without any physical actions . Normal monsoon cannot be assumed with just southwest monsoon, it has to rainy equally across all regions , more on the delta region where farming exist and also the items which are farmed. Moreover , if monsoon bring more rains and chance of farmed products can get washed away in floods are also high. Crude prices softening does'nt help for the recovery of economy , because the dollar price is high against rupee , which is needed for us for buying crude , stating this , recently the price of petrol being hiked.

from:  Raghuraman
Posted on: Jun 5, 2012 at 15:51 IST

Great. The finance minister of the second largest country in the world opined that recovery of economy is not in his hands but relating to factors which are not in his control. Keep it up FM.

from:  sankaran
Posted on: Jun 5, 2012 at 14:32 IST

First of all, cut off frivolous and unnecessary populist programs. We will save about 5000Cr every year minimum. Then, abolish nonsense adventures like Commonwealth Games, where we spent 12000 Cr and got back only a tiny fraction. Stop talking like India is a superpower. We're a third world country, sinking into fourth world chaos. Punish inefficiency. Punish laziness. We have plenty of headroom to run a proactive fiscal policy. Just take some decisions, clear infrastructure projects without waiting for bribes and watch the economy pick up. The numbers will take care of themselves. Don't waste time.

from:  B S Kumar
Posted on: Jun 5, 2012 at 11:19 IST

This is pathetic... the finance minister of our country is basically telling us that the
two things that he cannot control (oil prices and monsoon) are the things that are
going to save us.... why doesn't he do anything about the monetary and fiscal
deficits, reduce taxes on corporates, revamp tax code for better collection, free
petrol prices, etc etc??????

from:  Ahil
Posted on: Jun 5, 2012 at 08:57 IST

Our hon'ble FM is counting on normal monsoons and falling crude oil prices to catalyze the recovery. What an irony, Monsoons are referred to gambling in India and Crude oil prices are almost left at the mercy of OPEC. Belief on them would mean another disaster awaiting. God help us

from:  Nagaraj Patil
Posted on: Jun 5, 2012 at 08:29 IST
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