Centre to ‘strictly’ maintain fiscal deficit at 3.3%: Arun Jaitley

Irving Hamilton
September 16, 2018

On the second day of his review of the economy against the backdrop of a falling rupee and surging oil prices, the prime minister took stock of tax collections and macroeconomic indicators.

To contain the widening current account deficit (CAD) and check the fall of the rupee, the government on Friday announced specific steps to attract dollars and said that more measures are being planned to smoothen volatility in the financial markets.

The government has made a decision 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.

Experts said that the optimism on meeting tax target was well placed.

Senior Congress leader P Chidambaram on Saturday said the Narendra Modi government's five measures to stop further depreciation of the rupee and widening of the current account deficit (CAD) were "half-hearted and too late".

He said the government was confident that it would surpass the direct tax collection target and would meet or surpass the overall tax collection target, including that of the goods and services tax (GST).

He said that the government has spent 44 per cent of the budgeted expenditure till August 31 and will end the year without any cuts.

Asked if fuel prices and duty cuts were discussed, he said the meeting today was internal review meeting. "We are now seeing the impact of demonetisation on direct taxes", said M.S. Mani, partner, Deloitte India.

And even though we had a stiff target for direct tax collection, we can now see the impact of all the anti-black money measures which we had taken, like demonetisation and the GST.

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After the meeting, Jaitley exuded confidence of surpassing the 7-7.5 per cent GDP growth target projected in the last Budget presented on February 1, meeting capital expenditure targets, surpassing tax collections projections and exceeding the record Rs 1 lakh crore target of revenue mobilisation from government stake sale in PSUs. However, "there are some issues on which immediate action is needed", the minister said while announcing steps to increase inflow of foreign funds and check current account deficit.

A 71% increase in income tax return filers before the 31 August deadline this year of 5.42 crore compared to the number of filers in the same time a year ago hints at improved direct tax compliance.

"There is a phenomenal increase in the quantum of advance tax which has been paid".

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

The Finance Minister also said that capital expenditure targets would also be met. With the direct tax collection and indirect tax collection, the government will comfortably meet the target.

Jaitley said the fiscal year that ends in March 2019, will be completed without any spending cuts, adding that inflation remained broadly under control.

The government has collected Rs 92.19 billion from disinvestment receipt against the target of Rs 800 billion for FY19.

On Saturday, after detailed presentations by the Department of Economic Affairs, the Department of Revenue, the Department of Expenditure and DIPAM, the Prime Minister expressed his satisfaction with regard to the broad parameters in relation to the economy and the macro economic data that had so far emerged for this year, Mr. Jaitley said.

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