Fiscal goal in sight but not growth

The mid-term review of macroeconomic fundamentals by the finance ministry seems to hint that while the current government may be on course to achieve fiscal consolidation despite falling short in meeting its direct tax estimates, it may fall behind a little in reaching its economic survey GDP growth rate target of 8-8.5% for the current fiscal.

This is what could be inferred from the interaction of all the finance ministry bureaucrats with the press on Monday.

Even as Ratan P Watal, finance secretary, claimed that the country's fundamentals were much stronger today to face "external shocks, and that it was "on course to achieving fiscal consolidation, Hasmukh Adhia, secretary, department of revenue, made a counter comment that there could be a marginal shortfall in the direct tax collection this year.

The government officials also could not give an authoritative response on meeting its disinvestment target, which has been set at an ambitious Rs 69,500 crore for 2015-16. The government is looking at a fiscal deficit of 3.9% of the GDP for this fiscal.

"What is important mention is traditional fiscal consolidation is accompanied by growth slowdown (this year), but while adhering to the fiscal glide path we have simultaneously improved the quality of expenditure and redeployed resources saved by restructuring of old schemes and also we have gently introduced subsidies reforms and as result our capital expenditure this year have improved very significantly and which will have a multiplier effect to the economy as the we go on to the next six months of the current financial year," said Watal.

On GDP growth rate too, the bureaucrats could not give an assertive reply, saying it will exceed 7.5%, which is higher than Reserve Bank of India's (RBI) revised estimate of 7.4% (from the earlier 7.6%) but lower than government's growth estimates of 8-8.5%.

Arvind Subramanian, chief economic adviser (CEA), said despite "encouraging signals", he could not confidently give an economic growth rate number just yet.

"(Its) a bit early to take a strong view on growth rate in the current fiscal. Let the second quarter data come and then we will take a call on it," he said.

Here are finance ministry secretaries' views on major issues
Economic growth rate
The GDP growth is poised to exceed the 7.5% this year. The government is getting many encouraging signals, but it feels it is a bit early to take a strong view on it. International environment is more challenging than the government had expected in the beginning of the year. This, it believes, could take some toll on India's growth going forward.

Revenue collection
Last year, revenue collection was 12.4 lakh crore and target for this year is Rs 14.5 lakh crore, a growth of 16.5%. Last year, direct tax collection growth rate was 9% and indirect tax growth was 9.9%.
Growth in direct taxes till September was about 12% compared to the corresponding period last year. Growth in indirect tax till August, excluding the additional resource mobilisation (ARM) efforts (from new taxes or duties levied during the year) was 12.2% but with ARM, it was 36.5%.
There is likely to be some shortfall in the direct tax collection at the end of the year but some part of it will be made good by the indirect taxes because of the ARM.

Expenditure
From the expenditure point of view, this year too, the government does not want to go in for its over-rationalisation or cut at the last minute. It is also anticipating the Expenditure Management Commission to come up with creative suggestions to save not just by cutting public spends but better management of government funds.
Revenue expenditure this year is more realistic, which makes expenditure planning by the government more realistic, feasible and implementable than in previous years.

Disinvestment
The ministry has discussed the strategy and roadmap and all efforts were towards maximising the collection from disinvestment. It would be able to assess any shortfall only by the end of the year.

Black Money
Under the Foreign Account Tax Compliance Act (Fatca), US government has started giving information to India on flow of money into the bank account of Indian resident in the US. From the HSBC information, the government had filed prosecutions in 132 cases and has doubled the number of requests for information from other countries to 1600 this year from 800 last year.

Discom reforms
Finance ministry was working closely with power ministry and state governments for this. Three-to- four states were badly stressed, where have around 70% of the total outstanding dues. It was working on restricting these few states by putting conditionality.

Safeguard and anti-dumping measures
The government has decided to take effective protection steps for the domestic industry and farm sector due to glut in the market due to foreign products that was pushing down prices of local products. Starting Monday, the government has hiked import duty on ghee, butter and butter oil from 30% to 40% for six months (till March 31, 2016)
It has requested the industry to use the safeguard and anti-dumping mechanism to protect themselves from onslaught of dumping by overseas players.