Even so, given the fact of accelerating manufacturing output, the shortfallin excise collections does call for an explanation. Besides, the slack incustoms revenues, especially from non-oil imports, is ominous. The declinein non-oil (and non-gold) imports shows the growth in manufacturing outputhas not led to investment in industrial capacity expansion: that is whyimports of capital goods and imported inputs are down. So, will the rise inindustrial output be sustained? If strong investment demand does not emergesoon enough, industrial growth will falter. Perhaps, excise revenues are notrising as expected because prices of manufactures are rising rather slowly.This puts a squeeze on profit margins (reflected in the less than 1 per centrise in corporate income tax collections in April-October). The currentprofit experience (as also the prospective decline in import duties)discourages new investment.

Thus, the Centre's tax-GDP ratio seems slated to stagnate around last year'slow (despite an improvement reported in income tax collections duringApril-October this year). A rise in the tax-GDP ratio is unlikely in theforeseeable future (since import duties will have to be brought down). Sinhaharps on two points: the inflexibility of Government expenditure (oninterest on public debt, on defence and on wages, and pensions of thebureaucracy); and, the public debt problem has been inherited, it has beenthere for 20 years. But how does he propose to tackle the consequent fiscaldeficit? For now, disinvestment of PSU equity (through cross-holdings byPSUs) seems to be the only instrument he has to fill the hole in the budget.Sinha will do nothing without his much-talked fiscal responsibility Act; butif expenditure is irreducible, to what end the proposed Act?