FM targets Tax GDP ratio at 12 percent-14 percent

Finance minister Pranab Mukherjee on Monday made a case for raising the Tax GDP ratio to a “reasonable level” of 12%-14%, to enhance the government’s capability to fund social sector schemes. “I do believe that Tax GDP ratio, which has come down to 10% plus, must reach 12%, so that the Tax GDP ratio is at reasonable level,” Mukherjee said in his reply to the general budget 2011-12 in the Rajya Sabha.

It should be 12%-14% and the share of direct taxes, which is non inflationary, should be more in the kitty, he said. Share of direct taxes in the overall tax revenue has been growing, he said, adding, that it was 60% during 2009-10.

For 2010-11, the ‘revised estimate’ indicates direct tax contribution to the revenue basket at 57%, even as the ‘budget estimate’ of 2011-12 also pegs it at the same level, he said.

On economic growth, Mukherjee said, GDP growth was 8% in 2009-10 and 8.6% as per the latest report of CSO for 2010-11. “And therefore based on these figures, I have projected a growth of 9% for 2011-12,” he said.

Mukherjee also said that the government will follow fiscal consolidation, despite volatility in crude oil price and commodity prices. “I do feel, it is possible for us to maintain fiscal consolidation…it would be possible to reach fiscal deficit target of 4.6% (2011-12),” he said.

In the budget speech last month, the finance minister had said, “For 2011-12, I have kept it at 4.6% of GDP, which improves upon my own target for 2011-12, as indicated in the fiscal road map presented in the last budget.”

“In the Medium Term Fiscal Policy Statement being presented to the House today, the rolling targets for fiscal deficit are placed at 4.1% for 2012-13, and 3.5% for 2013-14,” he added.

Terming inflation as “one of the most important and serious concerns” he said that by March end it should come down to seven percent.

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