FY16 GDP growth was seen at 7.5%, against 8.1-8.5% earlier.
The finance ministry on Monday said it expected the overall tax collections this financial year to fall five-seven per cent short of the Budget estimate, largely due to less-than-projected direct tax collections.
This is despite the excise duty on petroleum products being raised, sops to the auto and capital goods sector being rolled back and service tax being increased in June.
Senior ministry officials were confident that the Centre's fiscal deficit would be restricted to 3.9 per cent of gross domestic product (GDP) without expenditure cuts, a departure from the past few years.
Dwindling tax kitty
The ministry said it remained confident of GDP growth of more than 7.5 per cent in FY16, though it would be less than the earlier projection of 8.1-8.5 per cent.
"There is likely to be some shortfall in direct taxes at the end of the year but some part of it will be made good by indirect taxes... The shortfall might not be more than five to seven per cent. Against the (Budget) target of Rs 14.5 lakh crore, we hope to achieve at least Rs 14 lakh crore, according to the current estimate," Revenue Secretary Hasmukh Adhia said at a press briefing.
All secretaries of the finance ministry, as well as Chief Economic Advisor Arvind Subramanian, were present at the press conference, which came ahead of Finance Minister Arun Jaitley's visit to Lima, Peru, to take part in a World Bank-International Monetary Fund meeting.
Tax collections of Rs 14 lakh crore would be 3.4 per cent lower than the Budget estimate.
Indirect tax collections have been robust, increasing 36.5 per cent between April and August.
This could be attributed to measures such as a rise in excise duty on petroleum products in October last year, an increase in service tax from 12.36 per cent to 14 per cent in June this year and doing away with excise duty concessions to the auto and capital goods sectors in January 2015.
Finance Secretary Ratan Watal stressed the Centre's fiscal deficit wouldn't exceed 3.9 per cent of GDP.
"If I may say upfront, this year, from the expenditure point of view, we do not want to go in for over-rationalisation or what you might term expenditure cuts... I am confident the target will be achieved and, perhaps, the next year will also be good; the fiscal glide that has been envisaged will be sustained," he said.
The expenditure management commission, he added, would come out with more suggestions, which the government would finalise by the year-end.
"That exercise is going on. I believe some very good suggestions are going to be made about how you need not necessarily save by cutting; you can also save by better management of money," he added.
On GDP growth for this financial year, Economic Affairs Secretary Shaktikanta Das said there were indications it would exceed 7.5 per cent.
"Despite the global slowdown and declining export demand, India has emerged as the fastest-growing major economy in the world," read an official statement. It added the government would continue to implement its reform agenda to realise potential growth of more than eight per cent.
The Reserve Bank of India (RBI) has lowered its growth forecast for FY16 from 7.6 per cent to 7.4 per cent.
Chief Economic Advisor Arvind Subramanian said the government would review its 2015-16 GDP growth projections after data for the September quarter was released.
For the quarter ended June this year, GDP growth stood at seven per cent, against 7.3 per cent in the March quarter of 2014-15. The Economic Survey had estimated growth at 8.1-8.5 per cent in FY16.
PDMA, MPC
Das said the government was in advanced stages of moving a proposal on the Monetary Policy Committee (MPC) and the Public Debt Management Agency (PDMA) to the Cabinet.
On PDMA, he said, "There is already a proposal under inter-ministerial circulation and as and when we get comments, which we expect in the next fortnight or so, we will take a final view to take it forward. At present, the idea is to start with a non-statutory PDMA but the remarks of various ministries and the Reserve Bank of India are awaited. Then, we will take it forward."
The seven-member MPC will be tasked with deciding interest rates and battling inflation. It will have appointees from RBI and the government.
The RBI governor, who will head the MPC, will have a tie-breaker vote, as opposed to the absolute veto power he has now. An earlier proposal on the MPC, under the proposed Indian Financial Code, had stirred a huge controversy, as RBI was neither given a veto power nor a majority.
The PDMA will be tasked with issuing government securities (currently issued by RBI).
The finance ministry first wants to set up a shell-PDMA, to be tasked with hiring manpower and setting up the support online and offline infrastructure, before being given the responsibility of issuing government securities.
Once cleared by the Cabinet, both the MPC and the PDMA will need legislative action.
Black money
The government will get Rs 2,488 crore from declarations of unaccounted money abroad, under a three-month compliance window that ended on September 30.
This is marginally higher than the Rs 2,262 crore estimated earlier.
Under the window, disclosure of funds and assets abroad stood at Rs 4,147 crore, against the earlier estimate of Rs 3,770 crore.
The unaccounted money and assets will be subject to 60 per cent tax and penalty. The payments have to be made by December 31.
"After taking into account the declarations in envelopes, the total number comes to Rs 4,147 crore," Adhia said, adding the envelopes had been counted but the declarations in these weren't reflected in the previous figures.
Those who failed to make disclosures under the window could face tax and penalty of up to 120 per cent of the value of the undisclosed asset, as well as imprisonment of up to 10 years, under the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015.
Warning of stringent action against those who hadn't made disclosures under the three-month window, Adhia said, "It is a risk they have taken...we will be going after them."
He added the government had already started getting information under various exchange treaties, including the Indo-US Foreign Account Tax Compliance Act.
"Wealth of information has come from the US. As many as 132 prosecutions in 43 cases of the HSBC Swiss list have been filed," he said.
On information from other countries on specific cases, Adhia said the number of requests in this regard had doubled to about 1,600 in 2014-15 from 800 in 2013-14.
"So, we are actually making a lot of requests for information to other countries in case specific instances of tax evasion or tax avoidance are found. And, we are working on assessing those, putting penalty, prosecution whatever is required," he added.
