NEW DELHI: Prime Minister Narendra Modi is expected to review the revenue and expenditure position of the government on Saturday.
The meeting with finance minister Arun Jaitley and key officials of the finance ministry could also include discussions on the current economic situation, depreciation of the rupee and crude prices.
The government has been under pressure to cut excise duty on petrol and diesel to provide consumers relief from runaway fuel prices, a measure that could create more pressure on finances with goods and services tax (GST) collections still below estimates.
The PM met Jaitley and economic affairs secretary Subhash Chandra Garg on Friday. The combined impact of higher crude prices and rupee depreciation has caused retail prices of petrol and diesel rise sharply, triggering demands for a reduction in excise duties.
A back-of-the-envelope calculation shows the government will lose about Rs 13,000 crore in annual revenue for every rupee cut in excise on a litre of fuel. The difference would have to be met with higher borrowings, which would lead to a wider fiscal deficit or force the government to cut spending, hitting welfare schemes.
There is a strong view in the government that it should not resort to kneejerk responses nor resort to any move that could impact the fiscal deficit as that could potentially be negative on the current account deficit and the rupee, a senior government official told ET.
Direct tax collections were estimated to grow 14% in the budget, but with higher refunds, net collections have remained subdued at 6.6%. GST collections dropped to Rs 93,960 crore in August from Rs 96,483 crore in the previous month.
GST collected in August was slightly lower than July’s Rs 96,483 crore and June’s Rs 95,610 crore. There are worries about this falling further after July’s GST reductions start playing out.
The government has held deliberations on the kind of steps that may be required if the current situation deteriorates, but policymakers do not feel there is any need for a reaction as of now.
“I have maintained that 68-70 (per dollar) perhaps is the right level and I don’t expect it to go beyond,” Garg had told ET in an interview earlier this week. “There may be some temporary factors that came into play last week but there is no fundamental justification.”
The finance ministry and the Reserve Bank of India have been in regular touch on the evolving currency situation.
The rupee closed at its highest level in a week at 71.84 against the dollar on Friday, marking a second consecutive day of gains after touching a record intraday low of 72.90 on Wednesday.
Source : Economic Times