The Modi Government said on Monday that the Finance Ministry has achieved, over the past one year, restructuring of the expenditure side of the budget: Outgo towards major subsidies is down to 1.6 per cent of GDP in 2015-16 from 2.5 per cent of GDP in 2012-13.
“While many commentators expressed doubt, we have simultaneously achieved 10 per cent increase in tax devolution to the States, achieved over 30 per cent increase in the Plan capital expenditure, and yet, adhered to the fiscal deficit roadmap in the Budget,” Finance Secretary Ratan Watal said, addressing a press conference.
Tax collections, however, could see a minor shortfall of 5 per cent within the targeted Rs.14.5 lakh crore, said Revenue Secretary Hasmukh Adhia. Tax collection will fall short by Rs.50,000 crore, he said, but expressed confidence that economic growth will exceed 7.5 per cent, with the fiscal deficit remaining within the budgeted target.
“If no other externality hits us, we are hopeful of achieving the total taxation target with possibility of a minor shortfall of around 5-7 per cent within the total budget target of Rs.14.5 lakh crore, mainly because of subdued growth in direct taxes,” he said.
The revenue collection target for the current fiscal is 16.5 per cent as against 9.9 per cent in the previous financial year, which, Dr. Adhia said, “looks to be ambitious, but the revenue position so far has been satisfactory”. Direct tax collection during April-September was 12 per cent higher than in the corresponding period in the previous year. Indirect tax collections are 36.5 per cent higher, he said and added that it would be 12.2 per cent after excluding the additional revenue measures by the government during the year.
He also said that the tax collections figure can be taken as a positive index of growth in demand in the economy.
“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,” Economic Affairs Secretary Shaktikanta Das said. He said that GDP growth during the current financial year could be expected to exceed 7.5 per cent.
He also said that the interest of small savers, especially of senior citizens and the girl child, will be kept in mind while reviewing the deposit rates for schemes in light of falling bank interest rates. “The interest of small savers, the interest of senior citizens, interest of girl child scheme, all these aspects will be taken into account. Social security component of small savings schemes is very important and government will keep that in mind,” Mr. Das said.
The Finance Ministry had last week said it would review the small savings schemes, which includes PPF and post office deposits, in view of the need for the transmission of lower interest rates to the rest of the economy following the cut announced by the Reserve Bank of India.
With the rate of interest on small saving deposits, which is administered by the Centre, close to 8.7-9.3 per cent, banks are reluctant to transmit the entire policy rate reduction by the RBI to borrowers. “We have to see that the savings rate doesn't get impacted,” Mr. Watal said.
