‘FY13 to be turnaround year for economy’

Ruling out any fiscal incentive to boost the sagging economy, Finance Minister Pranab Mukherjee today said the growth rate would see a turnaround in the current fiscal and based his optimism on declining crude prices in international markets and a normal monsoon.

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“We are taking all necessary steps to ensure that we come back to the path of the targeted GDP growth. Of course, it will take some time… but from this year we expect to make a turnaround,” he said addressing the top officials of the Income Tax Department.

India’s GDP growth rate during 2011-12 slipped to nine- year low of 6.5 per cent, down from 8.4 per cent in the previous two years.

Earlier this month, five global financial services entities including Morgan Stanley, Citi and Stanchart had lowered India’s growth forecast to 5.7-6.4 per cent for 2012-13.

On the possibility of fiscal incentives to promote growth, he said, “The second round of global uncertainty and the slowdown has come rather quickly on the heels of the previous one, with practically no headroom for running a pro-active fiscal policy.”

To cushion the domestic industry against the impact of global slowdown of 2008, the government had come out with stimulus packages amounting to Rs 1.86 lakh crore.

In view of the fiscal deficit rising to 5.76 per cent of the GDP in 2011-12, it may be not be possible for the government to issue more tax concessions as being demanded by the industry.

Highlighting the positives in the economy, Mukherjee said interest rate cycle has been reversed, there is growth in mining sector, turnaround in investment growth rate and there are predictions of normal monsoon, besides decline in crude oil prices.

“All these factors should help in recovery of domestic growth momentum,” he added.

In the Budget, the government had pegged 2012-13 GDP growth at 7.6 per cent.

On direct tax collection target of Rs 5.70 lakh crore for the current fiscal, Mukherjee said it was achievable.

“I do feel this target is moderate and can be achieved,” he said while asking the tax officials to work “relentlessly” to improve tax collection.

In 2011-12, the direct collection at 4.95 lakh crore was marginally down from the revised target of 5.05 lakh crore.

The Finance Minister said that while renewed growth momentum will help in improving the direct tax collections there are several challenges before the department.

“At a general level, there is an urgent need to reverse declining trend in tax-GDP ratio by augmenting collections,” he said. The ratio was nearly 12 per cent in 2007-08 but has dropped to around 10.5 per cent in 2011-12.

He said there is scope for improving tax administration by leveraging technology and facilitating a congenial public interface.

On the proposed Direct Tax Code (DTC), he said, “I have indicated that the amended Bill will be introduced in Parliament in the monsoon session. I am hoping that DTC will be effective from April 1, 2013.”

The time has come for the Department to prepare itself for the transition from the Income Tax Act, 1961 to the new DTC regime, he added.

“All this has to be completed in a manner so as to avoid inconvenience to tax payers and also to sustain the revenue buoyancy,” he said.

Referring to the menace of black money, Mukherjee said in order to deal with the unaccounted money stashed abroad by Indians, the government is expanding the network of Income Tax Overseas Units (ITOUs) to collect information on such wealth on real time basis.

He said the Department has been “striving” to check the menace of black money and tax evasion, which eats into vitals of the economy and also poses threats to national security through linkages to money-laundering and terrorism.