Given the strong recovery in almost all sectors, and the very encouraging tax proceeds so far, the tax revenue targets set in the budget could be exceeded, Chief Economic Advisor Krishnamurthy Subramanian said.
Speaking exclusively to Moneycontrol, Subramanian said that although signs were encouraging and he did see some upside to his 2021-22 gross domestic product growth projection of 11 percent, a possible third wave of the Covid-19 pandemic still remained an unknown factor.
“Even with me being conservative and not changing my projections for real growth, nominal growth may actually be higher and tax buoyancy also contribute. So both of those could actually lead to the tax revenues being higher than budgeted,” Subramanian said.
The 2021-22 budget has estimated net tax proceeds of Rs 15.45 lakh crore. Tax proceeds are usually backloaded, as most of it comes in the second half of the year, while expenditure is front-loaded.
As per data released by the Finance Ministry last week, net direct tax collections for the period of April 1-September 22 this year stood at Rs 5.71 lakh crore, a jump of 74 percent over Rs 3.27 lakh crore for the same period in 2020-21.
What the government is enthused about is the fact that net and gross direct tax collections are higher than pre-pandemic 2019-20 as well.
The collections till September 22 this year were 27 percent higher even compared to the same period of pre-pandemic 2019-20 when net direct tax collection was Rs 4.49 lakh crore.
Meanwhile, as on August 31, gross goods and tax collections for the current fiscal year stood at Rs 5.65 lakh crore. GST collection for the month of August 2021 came in at Rs 1.12 lakh crore, compared with Rs 1.16 lakh crore in July.
This was the second consecutive month that GST collections are above the Rs 1 lakh crore mark, indicating that economic recovery post the second wave of the Covid-19 is well underway, as most of the states with manufacturing bases showed healthy growth.
‘Third wave impact could be minimal’
“The way recovery has panned out in the second quarter, there's a very good likelihood that we may actually be able to realise the double-digit growth. So we continue to stick to our earlier estimates. There is a possibility of an upside. But at the same time, I don't want to get too ahead,” Subramanian said in his interaction with Moneycontrol.
While he was cautious about the third wave, Subramanian said that its economic impact could be minimal as more and more people were getting vaccinated and that administrations had learnt to deal with containment zones better without impacting economic activity.
“We have learned to actually manage despite the very devastating second wave, to be able to keep the emphasis on livelihoods, even while taking care of lives. I don't think there should be a need for even the kind of restrictions that were imposed in May and June, if the third wave is not very devastating,” he said.
Subramanian also expressed confidence that the Centre’s aim of vaccinating the entire adult population by December can be achieved.
“We had done a projection that India can administer around 70 crore doses by September. And while at that time it had seemed ambitious, now we are close to 85 crore,” he said.
“So, at this rate and with supply having expanded significantly, so much so that we are actually now planning to start exporting vaccines again, we should be very much on track to be able to vaccinate the adult population by year-end,” the CEA added.