Latest Expert Exchange Queries
sitemapHome | Registration | Job Portal for CA's | Expert Exchange | Currency Converter | Post Matrimonial Ads | Post Property Ads
News shortcuts: From the Courts | News Headlines | VAT (Value Added Tax) | Service Tax | Sales Tax | Placements & Empanelment | Various Acts & Rules | Latest Circulars | New Forms | Forex | Auditing | Direct Tax | Customs and Excise | ICAI | Corporate Law | Markets | Students | General | Indirect Tax | Mergers and Acquisitions | Continuing Prof. Edu. | Budget Extravaganza | Transfer Pricing
Popular Search: VAT RATES :: VAT Audit :: TDS :: TAX RATES - GOODS TAXABLE @ 4% :: due date for vat payment :: ARTICLES ON INPUT TAX CREDIT IN VAT :: form 3cd :: list of goods taxed at 4% :: Central Excise rule to resale the machines to a new company :: ACCOUNTING STANDARDS :: empanelment :: ICAI offer Get Windows 7,Office 2010 in Rs.799 Taxes :: articles on VAT and GST in India :: ACCOUNTING STANDARD :: cpt
« Indirect Tax »
 Grey areas remain for foreign investors on tax issues
 GST: New indirect tax regime to remove inter-state barriers, stimulate exports, says Nirmala Sitharaman
 Cabinet Approves 4 GST Supplementary Bills
 GST Council approves all five draft bills ahead of new indirect tax regime
 CAG questions income tax deparment’s ability to probe shell companies
 Income from MF investments must be shown in income tax returns
 Indirect tax higher than direct tax revenues in April-Feb
 Many foreign investors reach out to tax experts about indirect transfer of shares provisions
 How changes in capital gains norms impact your portfolio
 It's time to really pull up India's out-of-control banks
 Quest to widen direct tax net

Inflation cools, indirect tax mopup rises
August, 16th 2012

The economy has received a rare breather from the recent welter of bad news, with government figures showing an unexpected decline in inflation and robust indirect tax collections, although not enough to provide comfort that the worst was over and it would be all hunky dory from here on.

Contrary to expectations of a rise, headline inflation eased to 6.87% in July from 7.25% in June, data released on Tuesday showed, triggering a rally in the stock markets, where the data was viewed as buttressing the case for a cut in interest rates.

Separately, indirect tax collections for July rose 22.2% from a year ago, largely on the back of strong excise collections, seeding hopes that the industrial production figure for July would be better after the 1.8% contraction in June.

But amid all this, a 14.8% decline in July exports - the steepest fall in three years - provided a sobering reality check for the economy, underlining the scale of the challenge the country faces in cranking up its growth engines at a time the global economy is in turmoil.

Increase in Core Inflation Worrying

"The pickup in indirect tax collections was a surprise and might be a result of a drive to push up excise collections while there are clearly major risks going forward for inflation," said Abheek Barua, chief economist at HDFC Bank.
Analysts said they were not hopeful of the decline in inflation sustaining, attributing it to base effect, moderation in fuel inflation and a one-off drop in vegetable inflation.

Fuel inflation showed the sharpest fall at 5.98%, down from 10.27% in the previous month, while food inflation eased to 10.1% from 10.8%.

"While the headline WPI is better than expected, the details of the July inflation print leaves much to worry about," said Taimur Baig and Kaushik Dutta of Deutsche Bank.

One major area of concern is the increase in core inflation, a proxy for demand pressures in the economy, which edged higher to 5.4% from 4.9% in June, reversing the steady decline seen in the last four months.

With international oil prices already on the way up, rising to $115 a barrel from around $90 barely two months ago on hopes of a fresh round of stimulus measures in major economies, and global food production facing challenges because of drought in several countries, experts said it was just a matter of time before the recent declines in fuel and food inflation were reversed.

"Our view (is) that headline WPI inflation will rise above 8% by the end of the year, and we do not see today's positive reading as a reason for RBI to cut rates," Nomura economist Sonal Varma wrote in a note to clients.

RBI, which has of late taken a hawkish line on inflation disregarding calls for rate cuts to prop up a slowing economy, will next revisit its monetary stance on September 17. By then, it would have had another round of data on wholesale and retail inflation along with the all-important first quarter GDP numbers, due on August 31, to decide its stance. Estimates of GDP growth for the first quarter suggest a reading of around 5.5% growth, a slight improvement on the 5.3% growth in the January-March quarter, a nine-year low.

"RBI will wait until next month and look at whether the fall in inflation is sustainable," said Barua of HDFC Bank.
Industry, however, kept up its demand for monetary easing. "With the inflation numbers showing a decline and the global economic environment continuing to be challenging, continued hawkish monetary policy will not serve either the objective of reducing inflation or stimulating growth," said Rajiv Kumar, secretary-general of FICCI.

The 22% rise in indirect tax collections was largely on account of a 27.6% increase in excise tax collections. Service tax collections also rose by a healthy 37.5%, but customs duty collections recorded a relatively muted 8.2% increase, chiming in with the generally poor trade figures.

Imports fell 7.61% to $37.9 billion in July while exports contracted nearly 15% to $22.4 billion, leaving a trade deficit of $15.5 billion. The poor export performance, blamed on poor demand conditions in the US and Europe, means that India would find it difficult to meet its $350-billion export target for the full fiscal year, government officials said.

Home | About Us | Terms and Conditions | Contact Us
Copyright 2017 CAinINDIA All Right Reserved.
Designed and Developed by Binarysoft Technologies Pvt. Ltd.
Software Outsourcing Company Offshore Software Outsourcing Software Outsourcing Company India Offshore Outsourcing Company India Software BPO Software Business Process Outsourcing Software Outsourcing India Offsho

Transfer Pricing | International Taxation | Business Consulting | Corporate Compliance and Consulting | Assurance and Risk Advisory | Indirect Taxes | Direct Taxes | Transaction Advisory | Regular Compliance and Reporting | Tax Assessments | International Taxation Advisory | Capital Structuring | Withholding tax advisory | Expatriate Tax Reporting | Litigation | Badges | Club Badges | Seals | Military Insignias | Emblems | Family Crest | Software Development India | Software Development Company | SEO Company | Web Application Development | MLM Software | MLM Solutions