Tax collections continue to be buoyant

Indirect tax collections continue to show buoyancy recording 26 per cent increase in April-September 2016 to touch ₹4.08 lakh crore.

However, factory output remains a picture of worry with the latest August IIP print contracting 0.7 per cent, official data showed.

At the end of first six months, the Centre’s indirect tax collections stood at 52.5 per cent of the Budget estimate for entire 2016-17. In the same period last year, it was at 50.6 per cent of the Budget estimate.

Meanwhile, the Centre’s net direct tax collection has recorded a nine per cent growth in April-September 2016 to ₹3.27 lakh crore on the back of strong show in personal income tax mop up. At the end of the first six months, the Centre has mopped up 39 per cent of the Budget estimate for 2016-17.

While net Central excise collections during April-September 2016 grew 46.3 per cent to ₹1.83 lakh crore (₹1.25 lakh crore), service tax collections recorded 22.1 per cent growth at ₹1.17 lakh crore (₹0.96 lakh crore).

Customs duty collections were muted at ₹1.08 lakh crore, registered 4.8 per cent increase over ₹1.03 lakh crore recorded over the same period last fiscal.

Factory output contracted 0.7 per cent in August 2016, pulled down by sharp 22.1 per cent decline in capital goods.

The growth was also dragged down by cable (rubber insulated) which declined by 86.2 per cent year-on-year.

If one were to exclude the volatile cable (rubber insulated), IIP grew 2.4 per cent, said a research note by Emkay Global.

While mining output fell 5.6 per cent in August, manufacturing was down 0.3 per cent. Electricity generation recorded 0.1 per cent increase for the month under review.

The latest IIP, which is in negative territory for the second straight month, is, however, less than the contraction of 2.5 per cent in July, official data showed.

“Given, higher government revenue spending to revive the consumer demand, we expect a turnaround in the demand conditions from rural as well as urban areas. The growth and volatility in IIP will remain due to the skewness in the growth. Overall, we believe the production activity to improve in 2016-17 to 3.5-4.0 per cent from 2.5 per cent in 2015-16,” the research note added.

Richa Gupta, Senior Economist, Deloitte India, said that the latest figures depict a sluggish industrial economy that is beset by a lack of investment demand. A second negative print has essentially come on the back of another month of contraction in the capital goods segment with the usual category, rubber and insulated cables, exerting downward pressure.

On the other hand, consumption has remained somewhat stable with consumer durables registering growth and important categories such as automobiles doing well.

Basic goods and intermediate goods continue to expand. The heavyweight manufacturing segment has seen production levels stagnate from the previous month and growth trends remain muted.

“Going forward, we could see some improvement as consumption picks up and we get positive prints on the consumer non-durables side with the effects of monsoons filtering through the rural economy. However, expect the overall industrial production numbers to remain weak barring the one-off seasonal spikes,” she said.

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