Direct and indirect tax collections in the June quarter were encouraging and daily e-way bill data was also showing a positive trend, finance secretary Ajay Bhushan Pandey said.
“All these things are actually giving an encouraging signal that the economy is coming back to the rate sooner than what was being anticipated,” Pandey said at an event of the Federation of Indian Chambers of Commerce & Industry (Ficci) on Thursday by video conference.
If the current uptick continues without additional shocks, the sharp contraction forecast by several agencies for the current fiscal won’t come to pass, said economic affairs secretary Tarun Bajaj at the same event.
“June and July have been more promising than we initially thought… If we continue in this manner, and we are not saddled with any more surprises, it may not be as bad as the outside world thinks or we were thinking,” Bajaj said. “Unless Covid hits us very badly and we have to change our strategy in the middle, which seems very unlikely now, I am expecting a V-shaped recovery.”
Government open to borrowing more
Localised shutdowns on account of Covid-19 outbreaks have prompted the further lowering of GDP estimates. Ratings agency ICRA expects a 9.5% contraction in GDP in the current year against its initial 5% shrinkage estimate, citing a setback to the recovery seen in June due to the mini lockdowns.
The government was open to borrowing more to boost spending on infrastructure but monetising the fiscal deficit by the RBI was not under consideration.
“At this point of time, monetisation is not on the table at all. It has not been discussed with the central bank also,” Bajaj said. “The revenues are going up and we also mobilised some extra revenues through excise duty. So that is something that is going to help us this year.”
Income tax collections for the first quarter of the ongoing fiscal, which includes advance tax and tax deducted at source, were 80% of the year-ago level, Pandey said. These numbers should be seen in the context of corporate tax being cut to 22% from 30%, he said.
Goods and services tax (GST) collections of Rs 91,000 crore in May were at about 70% of the year earlier. This is expected to have improved in June, Pandey said, adding that the pace of transactions had risen compared to the previous months of lockdown. India’s nationwide shutdown began on March 25 and was progressively eased in May.