Expect FY24 revenue collections to meet budget targets, says Economic Affairs Secy

Ajay Seth

Amid concerns over slowing corporate tax mop-up, Economic Affairs Secretary Ajay Seth said on September 14 that he expects the Centre to meet budget targets set for revenue collections.

"We should not look at few months' data and try to find a long-term trend over there. We should see for another quarter and then reach a conclusion...My sense is that whatever numbers are there in terms of budget estimates and revenues, those will be realised," Seth told reporters on the sidelines of the Global SME Finance Forum in Mumbai.

India's corporate tax collections contracted by 10.35 percent in the first fourth months of the current financial year, sparking concerns over the government's ability to meet its Budget numbers for 2023-24.

However, according to Emkay Global economists Madhavi Arora and Harshal Patel, the corporation tax contraction is more of an anomaly than a trend, and this technical or seasonal adjustment by corporates should normalise the year.

"Nonetheless, assuming this is an anomaly and not a trend, we expect corporate tax collections to pick up in H2 FY24, albeit growing at a slower pace at 7 percent vs the budgeted 11 percent," according to this Emkay Global report released on September 8.

The Budget for 2023-24 has projected a modest growth of 10.4 percent in overall gross tax collections in line with a nominal GDP estimate of 10.5 percent in the current fiscal.

However, according to experts, for the current fiscal, the government's nominal GDP growth may come in lower than the Budget projection making the task of meeting the fiscal deficit aim of 5.9 percent of GDP more difficult and can also lead to weaker-than-projected growth in tax collections.

Global Bond Index

Responding to a question on whether the government expects key index provider JP Morgan to include Indian government bonds in global indices, Seth said, "it is for them to decide."

In 2022, key index providers such as JP Morgan and FTSE Russel retained Indian government bonds on their watch lists. Though a review is due at the end of the current quarter ending September, the government has not recently been in discussions with index managers, Moneycontrol reported last month citing a senior government official.

Talk of Indian government bonds being included in global bond indices picked up after a report by an inter-departmental group of the Reserve Bank of India (RBI) in July said gains from adding government bonds to global indices are greater than the risks. A report by BofA Securities further sparked speculation on the same as it pointed out that the need for further diversification of index constituents may lead to the index providers going ahead with India’s inclusion despite frequently cited operational difficulties for smaller investors.

Though India's taxation structure has been frequently cited as a hurdle to Indian government bonds (IGBs) getting listed on global indices, the Centre has maintained its stand on not providing any tax concession to facilitate this move.