Time for fiscal worries

The government is feeling the pinch of the slowdown in industrial growth—it is now the turn of indirect indirect tax collections to be impacted. The government’s indirect tax receipts grew 11.5 per cent during the April-June period to Rs 54,341 crore, lower than the target of 14 per cent.

This is largely due to a slowdown in excise collections, which rose marginally by 2.8 per cent, even though customs duty collections growth remained buoyant at 21 per cent, indicating increased imports. Meeting the targeted excise growth of 8.8 per cent for the fiscal will be a “formidable” task now, Finance Minister P. Chidambaram has admitted. Sluggish industrial growth—the IIP for May 2008-09 was at 3.8 per cent, down from 10.6 per cent in the corresponding month last year—and high inflation— it was at 11.98 per cent for the week ended July 19—and the recent duty cuts are largely responsible for the below par performance.

Says Ashima Goyal, Professor, Indira Gandhi Institute for Development Research: “The duty cuts mean that the government might miss its excise duty, and, consequently, indirect tax collection target this year.”

—Rishi Joshi