Finance minister Pranab Mukherjee on Monday said indirect tax collection for the current fiscal could be achieved as a reversal in the interest rate cycle could lead to a recovery in the growth momentum. The government is targeting to collect more than Rs. 4.99 trillion in indirect taxes in 2012-13.

Pranab Mukherjee . Photo by PTI.
Mukherjee, while addressing the annual conference of chief commissioners and directors general of customs, central excise and service tax, said that given the increase in central excise and service rate to 12% from 10% and the buoyancy in service tax collections, the government is confident of achieving the target.
For the 2011-12 fiscal, indirect tax collection was at Rs. 3.92 trillion against the revised estimates of Rs. 3.94 trillion.

He stressed the need for reversing the trend of a declining tax- GDP ratio by augmenting tax collections. This ratio was nearly 12% in 2007-08 but has dropped to around 10.5% in 2011-12, he said.

Mukherjee said a normal monsoon, lower international crude prices, an easy money policy along with an improvement in the quarterly investment growth rate should help the economy recover.

But given the disappointing fourth quarter GDP numbers, economists point out that the growth projections for the current fiscal may be difficult to achieve. Rating agency Crisil on Monday lowered its growth projection for the Indian economy to 6.5% from its March 2012 estimate of 7%.

The forecast has been scaled down in view of rising downside risks from recession in the Eurozone, muted domestic investment demand, a domestic policy logjam, and limited fiscal and monetary space to stimulate the economy, Crisil said in a note.

The economy grew at 5.3% in the fourth quarter of 2011-12 with the full year GDP at 6.5%, substantially lower than the governments earlier projection of 6.9%.