India expects V-shaped recovery in FY22 – Govt’s revenue position isn’t as dire as touted to be: DEA Secy

To boost manufacturing, as part of the Aatmanirbhar initiative, the government may extend a production-linked incentive scheme to 4-5 more sectors.

The finance ministry on Thursday exuded confidence that the Covid-battered economy will witness a “V-shaped recovery” as early as next fiscal, even though some established agencies forecast a sharp contraction of up to 7% for FY21. Economic affairs secretary Tarun Bajaj indicated that the Centre’s revenue position isn’t as dire as touted to be in some quarters. Despite the pandemic, he said, devolution to states was in accordance with the Budget targets in April and May and it was down by only about 10% in June and July. “We may not meet the Budgeted numbers for tax collection but it may not be as bad as anticipated,” he said at a Ficci event.

Bajaj also indicated that the government’s willingness to borrow slightly more if it’s required to fund critical infrastructure spending, stressing the government’s pledge to boost such productive spending that has high multiplier effect.

“I have personally spoken to the large infrastructure spending departments and I have assured them that even if I have to borrow a little more I’ll do that, but you should actually achieve your targets for infrastructure spends in the current year,” he said.

Commenting on any likely plan to print more money to fund fiscal deficit, Bajaj said: “At this point of time, monetisation (of the deficit) is not on the table. It has not been discussed with the central bank also.” The government has already raised its gross market borrowing plan by over 50% from the budgeted target of Rs 7.8 lakh crore to Rs 12 lakh crore, mainly to tide over the impact of the pandemic.

Gross direct tax mop-up (personal income tax and corporate taxes) in the first quarter hit 77% of such tax collected in the same period last year. This, official sources believe, suggests that economic activity may have recovered in June once the Covid-induced lockdown curbs that were put in place since March 25 were lifted. The goods and services tax collections, which nose-dived to a record low of Rs 32,294 crore in April, down 72% on year, recovered to Rs 62,009 crore in May and further to a respectable Rs 90,917 crore (down just 9% on year) in June. This also indicated a rather smart recovery of business activities after the lockdown was eased.

To boost manufacturing, as part of the Aatmanirbhar initiative, the government may extend a production-linked incentive scheme to 4-5 more sectors, including the sunrise ones. Recently, the government announced such schemes for the electronics manufacturing and pharmaceuticals sectors.

Bajaj said the finance ministry is in talks with Sebi on ways to deepen the bond market. There is some risk aversion among banks towards project financing, so developing a well-functioning bond market is critical, he added. Highlighting the government’s resolve to boost asset monetisation, Bajaj said the finance ministry is working with other ministries — such as railways, power, shipping and highways — in this regard.

Chief economic adviser Krishnamurthy V Subramanian on Wednesday indicated the possibility of more fiscal measures by the government to reverse a GDP slide once a credible Covid-19 vaccine is rolled out.