New Delhi: The Centre face a difficult task to achieve revenue collections because of slowing growth, senior officials said on Wednesday, indicating the government may come under increasing pressure to meet its fiscal deficit target.
The government had projected Rs3.98 trillion ($89.2 billion) from indirect taxes and Rs5.33 trillion from direct taxes in the budget for the fiscal year ending next March.
With most economic indicators showing signs of slowdown, the government is worried revenues may fall short of expectations.
Growth in January to March was the slowest in five quarters and many economists have pared their forecast as rising interest rates to battle high inflation begin to bite.
S.D. Majumder, chairman of the Central Board of Excise and Customs (CBEC), told a conference of senior officials it would be difficult to achieve the indirect tax target for 2011-12.
“The current financial year is going to be a challenging one. We will see if any mid-course revision in target is required,” he said.
Taxes on personal and corporate incomes mostly make up direct taxes, while indirect taxes include customs, excise and service tax.
Slowdown in revenue receipts may pressure the government’s fiscal deficit target of 4.6%, but senior officials have ruled out any change in the government’s borrowing programme as of now.
Finance minister Pranab Mukherjee said on Tuesday he expected growth of around 8.5% in 2011-12.
Subir Gokarn, a deputy governor of the Reserve Bank of India (RBI), also told television channel CNBC-TV18 at a conference on Wednesday it was inevitable that high interest rates would at some point affect growth but the central bank would look to keep that impact small.
The RBI has raised interest rates nine times since mid-March 2010, while headline inflation WPI (wholesale price index) in April was at 8.66%, well above the comfort zone of 4.5-5%.