Finance minister Arun Jaitley said on Monday that although the government could beat the 3.9% fiscal deficit target set for the current fiscal, given an incipient tax buoyancy, the intention is to use any extra fiscal space to be available for higher spending in infrastructure and social sectors.

Indirect tax collections grew an impressive 46% annually in April.

While addressing the top brass of the Income Tax Department at the beginning of a two-day conference here, the minister said that the projected 14-15% growth in tax collection was “reasonably plausible”. He said that deviating from the earlier fiscal consolidation road map target of 3.6% and setting a fiscal deficit target of 3.9% for the current fiscal was a conscious decision.

The government had managed to limit fiscal deficit for 2014-15 at 4% of GDP, lower than the revised estimate of 4.1% announced in February.

“Seeing the tax buoyancy, we can comfortably beat that target (3.9%). But the real objective is not to do that because we want to increase expenditure, which would lead to higher growth. Even if there are larger collections, we would like them invested in areas like infrastructure, irrigation and social sectors. That would bring larger dividends,” Jaitley said.

The Modi administration, which in its 2015 Budget provided an extra infrastructure outlay of Rs 70,000 crore with a focus on railways and roads, now wants to raise the spending on rural infrastructure, irrigation and social sectors.

While the Consumer Confidence Survey by the RBI, based on respondents in six cities, suggested urban consumption demand may pick up in the near term, with the rabi harvest damaged by unseasonal showers, rural demand is expected to remain subdued. While capital goods output growth fluctuates, the jury is still out on  a pick-up in consumption. Analysts are unwilling to bet on broad-based economic recovery until they see a sustainable and healthy growth in consumer goods output and in this context, enhanced public spending remains crucial.

The minister expressed satisfaction in the above 9% growth in direct tax collection in 2014-15 which was achieved despite the fact that the economy was recovering.

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