MUMBAI: While India can rejoice fall in crude oil prices that are likely to bring down the current account deficit (CAD) from estimated $78 billion in the current financial year by $5-6 billion, the bad news could be on the indirect tax front, that is likely to see a fall of Rs 90,000 crore, said a State Bank of India Research report.
The recent fall in crude prices means CAD will likely settle down at 2.6 per cent of the GDP (previously 2.8 per cent) and if the crude averages $65 and rupee stays at 70 to a dollar, then petrol and diesel prices could fall further on average of Rs 4 or more, the report said. Diesel prices could well head below Rs 70 per litre and petrol well below Rs 75, it said.
“It is thus imperative that we also keep exchange rate stable,” the SBI Research report said.
Direct tax collection for the second year in succession is likely to exceed the Budget targets by around Rs 20,000 crore and there will be an additional Rs 14,000 crore surplus in customs duty collection, it said.
However, the bad news is on the indirect tax front – on GST receipts and excise duty. SBI Ecowarp report said it expects Rs 90,000 crore shortfall in indirect tax collection. The government is likely to cut its expenditure at least by Rs 70,000 crore to meet the budgeted fiscal deficit of 3.3 per cent, it said.
“However, a point of genuine caution and concern. Global economic conditions are now increasingly looking fragile and a slowdown in global growth looks inevitable as early as 2019. Also, the market is now increasingly looking at a scenario when the next global slowdown may find little policy support as it will be difficult to pull back immediately,” it warned.
The SBI Research report also advocated policy measures to boost farm income given declining prices and not to have a rigid fiscal policy. “Fiscal consolidation must not ever be a burden on the policymakers in their quest for better policy mix,” it said.