Not long ago, it was normal for finance ministers to set tax targets in the annual budget only to revise them downwards a few months later. Or in the following year’s budget. Meeting even revised targets of tax collections invariably proved hard. How times have changed. A PTI report published in this newspaper on Wednesday said that the government has broadly met the tax collection target of over Rs 34.37 lakh crore. The target was raised for the direct tax collection (corporate and personal income taxes) in February this year in the pre-election interim budget while it was marginally lowered for indirect taxes (GST, Customs and excise).The net direct collections till March 17 were over Rs 18.90 lakh crore As for the GST, this at Rs 1.78 lakh crore in March this year was the second highest ever, the highest being Rs.1.87 lakh crore in April last. After refunds, the net GST collections marked a 13.4% increase over last year. Another key parameter of economic growth is manufacturing. It hit a 16-year high last month on the back of fresh orders. Purchasing Managers’ Index, a measure of industrial activity, with a score of 50 or above reflecting confidence and growth while below 50 indicated deceleration and despair, was 59.1 in March against 56.9 in February this year. This was the highest recorded since 2008. Given the robust tax collections it should not be hard for the government to meet its fiscal deficit target of 5.8% for 2023-24.
The fact that the economy is still emerging from the two-year hiatus of the Covid pandemic, given that there has been no let-up in infrastructure spending, given the slew of pro-poor welfare measures and schemes, still managing the nation’s purse prudently must redound to the credit of the government. Notwithstanding the periodic spurt in inflation due largely to seasonal factors, and the pressure on energy prices owing to the on-going Russian invasion of Ukraine, consumer inflation has remained moderate. Since inflationary prices still persisted, especially in food items, the central bank has been slow in easing the prime lending rate. Whether a cut in PLR is warranted in the overall favourable economic scenario we will soon find out when the RBI Monetary Policy Committee meets later this week. A small cut in PLR may boost sentiment further on the already record-high bourses. However, there is also a view that the MPC should stick with the status quo in the ongoing electioneering. Also, food inflation is still not fully tamed and within the comfort zone of the MPC. Meanwhile, on Tuesday SEBI chairperson M P Buch said the domestic mutual fund inflows into the bourses topped a record Rs.45,120 crore, the highest in a month. Countering that the markets are over-blown and disconnected from the real health of the economy, the apex market monitor said on the contrary these are a “reflection of the optimism and the trust and faith the world has in India…”
Markets seem to have taken the return of the current government for granted. Though one must await the official outcome, set to be known only on June 4, unless there is an unforeseen event which impacts majorly the current popular mood, market men seem to have no reason to alter their common perception. The Opposition’s discursive and disjointed narrative has not found any traction despite a couple of missteps by the ruling party. Markets hate to be taken by surprise. The even pace of economic growth, markets fear, will be disrupted should a weak coalition comprising several small regional groups be in a position to stake claim on government-formation. In that context, the ruling party’s constant stress on ~ ab ki baar, char so paar~ comes as music to those who dread a weak coalition with each component of the alliance working autonomously without reference to the overall thrust of the government a la UPA-II. Overall management of the economy being competent, it is unlikely that economy will be a major theme in the election. Politicians of all hues are most likely to harp on political rather than economic issues, despite some Opposition leaders trying valiantly to make jobless growth an election issue.
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