India’s government expects tax revenues for the current fiscal year to be 10% above budget, beating forecasts for the first time in four years, two officials said, as the economy powers back towards pre-pandemic levels.
Tax revenues, budgeted at ₹15.45 lakh crore for the year to March 31, have been below projections ever since 2017-18 as the economy lost momentum even before COVID-19 and then slipped into a deep recession.
But now retail sales have picked up and exports are surging at a record rate, suggesting it is rebounding faster than anticipated after a devastating second wave.
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India’s economy grew 20.1% between April and June, versus a 24.4% contraction during the same period last year.
“Activity levels have improved a lot. All indicators are showing a faster-than-anticipated recovery, we are set to beat our own [tax] estimates this year if all remains well,” one of the officials said.
The finance ministry did not immediately reply to e-mails and messages seeking comment on tax revenues.
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If tax payments remain strong and the government is able to hit the 2021-22 target for revenues from its ongoing privatisation programme, then it will be able to beat its fiscal deficit projection of 6.8% by as much as 30-40 basis points, the second official said.
Air India, LIC boost
India aims to raise ₹1.75 lakh crore in the current fiscal year through sales of stakes in state-run companies and is hoping the sale of Air India to the Tata Group will provide an impetus.
The listing of state-owned Life Insurance Corp. could fetch up to a further ₹1 lakh crore, according to another official. “We are working very hard to complete the listing of LIC and we should be able to do it by March,” the third official said.
Rating agency Moody’s Investors Service this month upgraded its outlook on India to stable from negative, saying downside risks in the country and its financial institutions had eased.