)
A steady 37 per cent growth in indirect tax collections since the beginning of the fiscal year 2015-16 reflects that the underlying momentum in the economy is improving, Chief Economic Advisor Arvind Subramanian said on Wednesday.
"The growth in underlying indirect tax collection for the first four months suggests an increase in nominal GDP growth. These collections indicate that the underlying momentum in the economy continues to improve across all sectors," Subramanian said at a press briefing in the Finance Ministry.
Indirect tax collections grew 39.1 per cent in July to Rs 56,739 crore, the fastest pace in three months, on robust pickup in excise duty mop-up, official data showed on Tuesday. The rise was more on account of petroleum and diesel excise duty hike instead of a recovery on the manufacturing side and increase in the service tax rate to 14 per cent against 12.3 per cent from June. Combined over the four months of April-July, indirect tax revenue jumped over 37 per cent to over Rs 2.1 lakh crore.
“The data also includes Customs collections data, which have also been helped by rupee depreciation of 6 per cent between April and July," Subramanian said on Wednesday.
He also said that world economies, including India, would have to take note of Chinese currency devaluation designed to avert slowdown in its economy and exports.
"There is no doubt that China is responding to its own internal development of slowing down of growth and exports in order to give its economy a boost. All of us policymakers around the world, including India, have to take notice of this action," Subramanian added, but refused to comment on the impact of yuan devaluation on India and its exports.
In a move which shocked markets worldwide, The People’s Bank of China slashed the Yuan’s daily reference rate on Tuesday by a record 1.9 percent, to boost exports, amid a slowdown in the world's second-largest economy and the recent stock market crash.
The world's largest exporter, China's exports account for 13.7 per cent of the global pie. India's overall exports have contracted for seven straight months until June 2015.
Subramanian said China, on the one hand, has devalued the currency and taken measures aimed at reducing the spread between onshore and offshore rates. "This action is both an endeavour to make their currency a more plausible credible candidate for inclusion in the SDR basket," Subramanian said. Special Drawing Rights (SDR) is an international reserve asset created by the International Monetary Fund (IMF) to supplement its member countries' official reserves.
Talking about credit growth in the economy, Subramanian said when the wholesale price index is in negative for eight months, one should not look at nominal credit growth. “Real credit growth has started increasing after declining for several quarters and within that, there is a sharp divergence between real credit growth to the personal sector, which is doing surprisingly well, while it is credit growth to industry that remains relatively weak," he said.
