The depreciating rupee, which has hit exporters and exports, may at least have one up side. The finance ministry is hopeful that the weaker rupee will boost collections from customs duty and help it meet its indirect tax target. The government expects to earn Rs 3,21,264 crore as indirect tax revenue this fiscal.

With the rupee depreciating, the value of exports and imports will increase, subsequently increasing the customs duty to be paid on them. ?We are hopeful that this will partly offset the losses from fiscal cuts and help us in meeting our revenue target for customs duty,? a tax official told FE.

This will help the Central Board of Excise and Customs (CBEC) partly bridge the shortfall of about Rs 23,000 crore, which it is expected to lose this fiscal on account of the various duty cuts and exemptions given to crude oil, iron ore and more recently to raw cotton as part of the government?s anti-inflationary measures. The Indian currency meanwhile has depreciated over 10% since April this year and is close to 42 against the US dollar.

So far, collections from the duty on exports and imports have been well on track. In the first quarter ending June 2008, the Exchequer netted Rs 28,459 crore from the tax, which was a growth of 20.9%. This is well over the required 14.4% increase to meet the Budget estimate of Rs 1,18,930 crore in 2008-09.

Mahesh Purohit, director, Foundation for Public Economics and Policy Research agreed and said, ?The depreciating currency will certainly increase customs duty collections as the value of exports will go up.? Purohit also expects that the record inflation and increased prices of goods will lead to overall buoyancy in indirect taxes, especially excise duty as the base for valuation of the goods increases.

And if all else fails, the CBEC is upbeat that the shortfall in the indirect tax will be met through higher collections from service tax. Collections from the tax have risen by over 33% to Rs 9,774 crore till end May. The growth rate is much higher than the 26% increase required to meet the BE of Rs 64,460 crore for service tax.

?There is good buoyancy in service tax collections and even if we fall short of individual targets for each tax, the growth in service tax will help us meet the overall target for indirect taxes,? a tax official said.

Higher revenue collections will help the Centre improve its deficit targets. The Centre?s total deficit is expected to spill over to 6.5% of the gross domestic product on account of massive susbidies for oil and fertiliser. In fact on Tuesday, international rating agency

Fitch revised India?s local currency outlook to negative from stable on account of the government?s worsening fiscal situation.