NEW DELHI: Indian economy appears to be gathering momentum with December 2009 customs duty collections suggesting a recovery in imports,indicating that investment activity may be on the up and domestic demand stronger.
Customs collections in December 2009 was Rs 7,399 crore, almost same as in December 2008. But this is a big improvement as imports duty collections had dropped 31% during April-November 2009 to Rs 52,011 crore.
"Even though the growth rate was flat in December, we are hopeful that the trend may get stronger in the coming months,’’ a government official told ET. The flat customs collections in December 2009 indicate that contraction in imports may be getting over. Non-oil imports were down 23.8% at $120.2 billion during April-November 2009 compared to $157.8 billion in the corresponding period of 2008.
Oil imports had turned positive in November 2009, growing 7.3% to $6.38 billion, but that would not contribute to better customs collections as crude imports are allowed at zero duty as of now. Clearly, the pick up in imports is on account of an improvement in non-oil imports . Indeed, contraction in non-oil imports was at 2.6% in November 2009.
The pickup in non-oil imports would indicate a more robust economic activity as these would relate to import of inputs and capital goods. This would suggest that investment activity is picking up as only then there would be more demand for capital goods. This would be consistent with the trend in domestic manufacturing as well. The production of capital good had grown a strong 12.2% in October 2009 against 6.3% during April-October 2009.
The improved customs duty collections would also help government get close to its tax collection target of Rs 2.69 lakh crore. The government has budgeted Rs 3.7 lakh crore through direct taxes and hoped to exceed that by about Rs 20,000 crore.
The overall deficit in the indirect taxes is expected around Rs 20,000 crore. So, the overall tax collections target of Rs 6.28 lakh crore for the fiscal 2009-10 should be achieved. The government has budgeted for a fiscal deficit of 6.8% of GDP for the fiscal. This could go up in case the tax collections fall below the target. However, if proceeds from 3G auction were to come this year itself then the government could comfortably meet the deficit target even if there is some drop in tax collections.
Source : The Economic Times