Economy

Govt to stick to 3.3% fiscal deficit target: Arun Jaitley

Govt to stick to 3.3% fiscal deficit target: Arun Jaitley

A day after announcing a set of measures to boost short-term capital inflows into the country to rein in rupee depreciation and curb rising current account deficit (CAD), finance minister Arun Jaitley on Saturday sent a strong signal of fiscal prudence by committing to the fiscal deficit as well as capital expenditure targets.

"We will have a growth rate higher than what we'd projected earlier this year in the budget", Jaitley said, after he and his team briefed Prime Minister Narendra Modi on the economy. He said that government is confident to achieve the fiscal deficit target for the current fiscal year.

In a message clearly aimed at allaying market concerns that a confluence of factors could derail the Indian economy, Arun Jaitley said on Saturday the government is sure of meeting the fiscal deficit target given robust tax collections.

With regards to Masala bonds, Jaitley said it has been made a decision to do away with the withholding tax on bonds issued till March 2019.

He also exuded confidence of surpassing the Rs 1 lakh crore target from disinvestment proceeds.

He added that CBDT was "very clear" that this year the government would be able to collect taxes in excess of the budgeted target.

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"We are confident that between direct and indirect tax collection, the government will comfortably meet the target, if not surpass it", Jaitley said.

However, the FM did not say if today's meeting discussed the recent spike in fuel prices. He also assured that inflation would be broadly under control. "Because government was in denial", the former Finance Minister said on Twitter.

The government has chose to withdraw withholding tax on Masala bonds, allow some breathing space to foreign portfolio investments, and check non-essential imports and promote exports in order to arrest the decline in rupee and check the widening current account deficit. The Centre now levies a total of Rs 19.48 per litre of excise duty on petrol and Rs 15.33 per litre on diesel.

"The primary focus of yesterday's discussions was with regard to current account deficit and how to narrow it down and possible steps with that regard". Department of Economic Affairs (DEA) gave a detailed presentation to PM Modi.

The government has targeted a 14.43 per cent increase in direct tax collections at Rs 11.5 trillion in 2018-19 against Rs 10.05 trillion the previous year. "We are now seeing the impact of demonetisation on direct taxes", said M.S. Mani, partner, Deloitte India. "There is phenomenal increase in the assessee base.in the quantum of advance tax which has been paid", he said. "With the kind of pickup in consumption which has taken place, it will have an impact on GST collection in future months".


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