Short on revenue, govt may go for larger mkt borrowings

The government is finding it difficult to meet direct tax target due to industrial slowdown and may go in for larger market borrowings than the revised target of Rs 4.7 lakh crore in the current fiscal, a top Finance Ministry official said today.

"Growth slowdown is a big challenge. We may miss the direct tax target ... Meeting 4.6% fiscal deficit target is out of question," the official said.

The government envisages to mop up Rs 5.32 lakh crore from direct taxes, which mainly comprise corporate and personal income taxes. The net direct tax collection was Rs 2.35 lakh crore during the first eight months of this fiscal.

"There has to be extra (market) borrowing to bridge (the revenue) deficit. If deficit increases then the government will have to borrow," he added.

In September, the government had announced an additional market borrowing of Rs 52,800 crore on top of Rs 4.17 lakh planned in the Budget.

Besides, slowdown in the economic activities due to domestic and global factors, the government's subsidy bill on petroleum and fertilisers is likely to increase further.

Recently, Finance Minister Pranab Mukherjee said that subsidy bill in the current fiscal is likely to go up by a massive Rs 1 lakh crore on account of higher outlays towards fertiliser, food and oil.

In the Budget, the government had earmarked Rs 1.34 lakh crore towards major subsidies like fertilizer, food and oil.

On the economic slowdown, the Finance Ministry official said that the high interest rate regime was hurting growth.

The Reserve Bank has adopted a tight monetary policy since March 2010 and raised interest rates 13 times. However, it did hike interest rates in last monetary policy review.

The factory output measured on the Index of Industrial Production (IIP) contracted by 5.1% in October, the worst performance in almost 2.5 years.