Never miss a great news story!
Get instant notifications from Economic Times
AllowNot now


You can switch off notifications anytime using browser settings.
10,829.3588.0
Stock Analysis, IPO, Mutual Funds, Bonds & More

India faces `silent fiscal crisis' on tax gap, Modi adviser says

India is facing a silent fiscal crisis owing to a shortfall in tax revenues, as per PM-EAC member Rathin Roy.

Bloomberg|
Updated: Jul 22, 2019, 08.11 PM IST
0Comments
BCCL
Rathin-Roy---BCCL
Rathin Roy (File Pic)
By Archana Chaudhary

India is facing a silent fiscal crisis owing to a shortfall in tax revenues, and the government’s budget suggests it may have grossly underestimated the problem.

That’s the assessment of Rathin Roy, a member of the Prime Minister’s Economic Advisory Council, who said the budget presented this month won’t help fully reverse the problem in the current financial year that began April 1.

Finance Minister Nirmala Sitharaman lowered the budget deficit target for the period to 3.3% of gross domestic product from 3.4% previously, despite expectations for a stimulus to revive weak economic growth. Instead, she sought to narrow the gap by raising taxes on the wealthy, selling stakes in state-run companies and demanding more dividend from the central bank.

“At the heart of the crisis is a shortfall in tax revenues,” said Roy, who is director of the National Institute of Public Finance and Policy in New Delhi. “It is mainly due to a shortfall in GST revenues (but also personal income tax revenues), compared to the numbers presented in the revised estimates.”

The government estimates to raise 25.5 trillion rupees ($370 billion) as taxes in the current fiscal year, according to the budget document. However, estimates in the Economic Survey published separately by the Finance Ministry show that provisional tax revenue, at 20.8 trillion rupees, missed the revised estimate of 22.5 trillion rupees for the year ended March 31.

Roy separately questioned the government’s 3.4% fiscal deficit numbers for the last fiscal year, citing a revenue-GDP ratio of 8.2%, which was a full percentage point lower than the revised estimates.

“How is this done given the stunning shortfall in the tax-GDP ratio,” he asked.

Sitharaman had earlier responded to criticism about the budget, saying “every number” in the spending plan is authentic and there need not be any speculation.
0Comments

Also Read

White House requests $5B to ease Puerto Rico fiscal crisis

UPA govt creating fiscal crisis for Pondy govt, says CPI

Kelkar report warns of fiscal crisis, recommendations contrary to policy: Government

Deadly Japan earthquake risks UK fiscal crisis: Study

Comments
Add Your Comments
Commenting feature is disabled in your country/region.
Download The Economic Times News App for Quarterly Results, Latest News in ITR, Business, Share Market, Live Sensex News & More.

Other useful Links


Follow us on


Download et app


Copyright © 2019 Bennett, Coleman & Co. Ltd. All rights reserved. For reprint rights: Times Syndication Service