Government expects tax revenues for the current financial year to be 10 per cent above budget, beating forecasts for the first time in four years, two officials said, as the economy powers back towards pre-pandemic levels.
Tax revenues, budgeted at Rs 15.45 lakh crore for the year to March 31, have been below projections ever since 2017-18, as the economy lost momentum even before COVID-19 and then slipped into a deep recession.
But now retail sales have picked up and exports are surging at a record rate, suggesting it is rebounding faster than anticipated after a devastating second wave of coronavirus infections this year.
India’s economy grew 20.1 per cent between April and June, versus a 24.4 per cent contraction during the same period last year.
“Activity levels have improved a lot. All indicators are showing a faster-than-anticipated recovery, we are set to beat our own (tax) estimates this year if all remains well,” the second official said.
The finance ministry did not immediately reply to emails and messages seeking comment on tax revenues.
If tax payments remain strong and the government is able to hit the 2021-22 target for revenues from its ongoing privatisation programme, then it will be able to beat its fiscal deficit projection of 6.8 per cent by as much as 30-40 basis points, the second official said.
India aims to raise Rs 1.75 lakh crore in the current fiscal year through sales of stakes in state-run companies and is hoping the sale of Air India to conglomerate Tata will provide an impetus.
The listing of fully state-owned Life Insurance Corp. (LIC) could fetch up to a further Rs 1 lakh crore, according to another government official. “We are working very hard to complete the listing of LIC and we should be able to do it by March,” the third official said.
Ratings agency Moody’s Investors Service this month upgraded its outlook on India to stable from negative, saying downside risks in the country and its financial institutions had eased.