Growth Dips, But Govt Says Deficit Not A Worry.

India’s economic growth may slowdown to 8-8.5 per cent in current fiscal as against projected 9 per cent. But, finance ministry is confident that this will not affect its fiscal consolidation plans as there would be a tight leash on expenditure owing to high inflation and high crude oil prices would keep revenue collections buoyant.

There will also be no increase in government borrowing, pegged at Rs 4.17 lakh crore this financial year. “We are confident of achieving fiscal deficit target of 4.6 per cent of GDP in 2011-12 and any slowdown in economic growth feared this year will not result in fall in revenue collections,” a finance ministry official told Financial Chronicle.

Direct tax collections pegged at Rs 5.32 lakh crore in 2011-12 will be achieved and surging crude oil prices would only increase excise and customs duty collections, he said adding Rs 9.32 lakh crore total revenue collections would be achieved.

When India had achieved 8.5 per cent GDP growth in 2007-08, the compound annual growth rate of direct tax collections was 29 per cent, so there was no reason to believe that 19-20 per cent growth in direct tax collections to mop up Rs 5.32 lakh crore could not be achieved this year, he said.

GDP growth has been projected at 9 per cent in 2011-12. The finance ministry forecast slowing by 0.25 per cent at 8.75 per cent, he said and pointed out that inflation only pushes up indirect tax collections.

Inflation contributed to higher tax collections in 2010-11 at Rs 7.92 lakh crore against the upwardly revised estimates of Rs 7.85 lakh crore. Official said he did not expect an unusual surge in subsidies particularly oil subsidy in the wake of increase in global crude oil prices now ranging between $108-115 dollars a barrel.

Unlike last year, government has set aside Rs 20,000 crore for oil subsidy in the budget. In 2010-11, government provided Rs 35,000 crore oil subsidy through supplementary grants for extra budgetary spending.

Fertiliser subsidy bill too will be within Rs 55,000 crore allocated in the budget, the official said adding he did not foresee any major additional outgo on account of proposed food security law that is unlikely to be implemented earlier than January or February 2012.

Revised figures show that India's fiscal deficit for 2010-11 was Rs 3.69 lakh crore in absolute terms, which was equivalent to 4.7 per cent of India's GDP. This is lower than budget estimate of 5.1 per cent of GDP at Rs 4.01 lakh crore. This provided comfort to the government that is struggling to grapple with high inflation.

In 2010-11, India had a revenue bonanza of Rs 1.06 lakh crore due to 3G and broadband wireless spectrum auction. This year, the budget has provided for Rs 15,000 crore revenue from 2G-auction but it may go up to Rs 80,000 crore.

Source : www.mydigitalfc.com