Falling crude prices, normal monsoon to help Indian economy
MDT/PTI 04 June 2012

Finance Minister Pranab Mukherjee, however admitted, that the Indian government does not have headroom for proactive fiscal policy

New Delhi: Pinning hopes on declining global crude oil prices and normal monsoon, Indian Finance Minister Pranab Mukherjee on Monday said these positive factors would help in improving growth rate, which slipped to a nine-year low of 6.5% last fiscal, reports PTI.

"A normal south west monsoon has been predicted for 2012-13 and there has been a rapid decline in international oil prices in recent weeks... All these factors should help in the recovery of domestic growth momentum," he said said while highlighting "positives" of Indian economy at the annual conference of Central Board of Excise and Customs (CBEC).

The interest rate cycle has been reversed by the Reserve Bank of India (RBI) and mining sector growth has turned around. Further, there has been progress in fuel linkage for power projects and improvement in investment growth rate, he emphasised.

There were no "major adverse results" on corporate performance in the last quarter of 2011-12, he added.

The Finance Minister, however admitted, that government does not have headroom for proactive fiscal policy.

"Like for most parts of the world, the second round of global uncertainty and the slowdown has come rather quickly on the heels of the previous one, with practically no headroom for running a proactive fiscal policy," he said.

Indian economy registered healthy growth of 8.4% in 2009-10 and 2010-11, but renewed global uncertainty, emanating mostly from Euro zone area affected domestic business sentiment in 2011-12.

A tight monetary policy directed at taming inflationary pressures in the economy also came in the way of consolidating economic recovery.

GDP growth in 2011-12 has slowed significantly to just 6.5% and this has been "disappointing", Mukherjee said.

Stressing that a strong indirect tax administration was fundamental to the development of a country's economy, Mukherjee asked the officials of CBEC to ensure timely collection to taxes.

"The challenges before your department today are multi-faceted... The important task before you is to ensure timely collection of all legitimate tax dues, without, of course, unduly burdening the assessee," he said.

He asked them to sharpen their audit skills and conduct scrutiny of assessees' records to bring to the kitty any tax that might have escaped assessment and to detect frauds which are often intelligently planned and meticulously executed.

"While the need for trade facilitation and tax payers' satisfaction cannot be over-emphasised, any mala fide and corrupt practice to evade payment of legitimate dues, needs to be handled as per established procedure of law," he said.

Mukherjee expressed hope the CBEC would be able to meet the indirect tax collection target for 2012-13.

"They (CBEC) have done good job last year... I am confident that the department would leave no stone unturned in ensuring that the targets for the current year are not only met but handsomely exceeded, Mukherjee said.

With government increasing rates of both excise and service tax by 2%, he said "these changes are likely to help the Department in garnering additional tax revenue".

Indirect tax collections (central excise, customs and service tax) target for 2012-13 is Rs4.99 lakh crore, up by about 27% over the previous year.

Despite a slowdown in growth and the duty cuts effected on petroleum products in June 2011, the indirect tax collection of Rs3.92 lakh crore (excluding cess) was only marginally short of the target Rs3.94 lakh crore in FY12.

Mukherjee also said there is an urgent need to reverse the declining trend in tax-GDP ratio by augmenting tax collections. The ratio was nearly 12% in 2007-08 but has dropped to around 10.5% in 2011-12.

Mukherjee told CBEC officials that there is a scope for improving tax administration by leveraging technology and facilitating a congenial public interface.

He further said that smuggling of fake Indian currency note (FICN), narcotics and psychotropic substances, illicit export of flora and fauna; antiques and other prohibited goods pose a grave threat to our economy. Commercial frauds perpetuated to evade payment of legitimate duty are another area of growing concern.

"To enable you to deal with these concerns effectively the initiatives taken to improve the infrastructural and technological capabilities at your command need to be rapidly implemented," he said.

On capacity building, he said this needs to be accorded a high priority so that "we are able to build a team of dedicated and motivated workforce to respond to the challenges confronting the department".

The issues related to human resource development should be given priority, and necessary steps to promote an administration with a humane face earnestly pursued, he said.

"You all at the senior level cannot remain insensitive to the genuine concerns of your workforce, be it the legitimate demand for a timely promotion or holding of DPCs or timely sanction of annual increments, or payment of retirement benefits," Mukherjee said.

The CBEC has constituted four 'Breakaway Groups' for in depth examination of some of the current issues that need the immediate attention of the department.

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