Gokarn says hiking indirect taxes a smart move

Finance Minister Pranab Mukherjee's Budget proposal to raise excess revenue from indirect taxes rather than touching the direct taxes is a smart move, as it does not require a Parliamentary approval, the Reserve Bank has said.

RBI Deputy Governor Subir Gokarn said this method improves the reliability of garnering the necessary revenue as change in indirect taxation is an executive decision, and does not have to be approved by Parliament.

Gokarn said adopting such measures will reduce the chances of fiscal slippage, which widened to 5.9% in in the current fiscal from the targeted 4.6%, and help supplementing the RBI's policies.

In the Budget, Mukherjee pegged fiscal deficit at 5.1% for 2012-13. He has announced an across the board hike in service tax and excise to 12% from earlier 10%.

Auto major Tata Motors announced a price hike within hours of the Budget speech, but Gokarn indicated that RBI is comfortable with it and will take that factor into account while formulating its policy.