With inflation dropping to a seven month low of 8.4% for the week ended on 22nd November’08 and the crude prices going down to around $45 per barrel in international markets, a cut in the prices for petrol of Rs.5 per lt and Rs.2 for diesel effected on 5th Dec’08 is likely to pull down the inflation level further.
The picture on the tax collection side too is quite good if the statement of N.B.Singh, the Chairman of the Central Board of Direct Taxes (CBDT) is to be believed. He says, “We are confident of achieving the tax collection target of Rs.3,95,000 crores for the financial year 2008-2009.” As per CBDT officials, the direct tax collections rose by about 29.5% to Rs.1,66,905 crores during the first seven months (April-October) this year compared with the corresponding period last year. The corporate tax collections also rose by 33.5% to 1,05,174 crores and personal income tax collections were up by 23.1% to 61,433 crores during the said seven months comparative period.
Fringe benefit taxes grew by more than 47% and the dividend distribution tax rose by 48%. These, along with higher TDS collections from corporate sector, are indicative of the continued strength of the Indian economy as per CBDT analysis.
Further, according to CBDT, advance taxes recorded higher growth in mining, mineral, metal, engineering, banking, telecom, IT, pharma and consumer durables for the aforesaid period while collections were less in infrastructure, cement, automobiles, textiles, power and downstream oil companies were less.
In line with and to contain the effect of economic downturn, the manufacturing sector has started slashing prices to boost up demand again. The cost cutting measures, freezing new recruitments and salaries levels has helped India Inc to prevent large-scale retrenchments, thereby de-catalyzing the cascading effect of recession. The case in example is ‘Jet Airways’ which has retained the employee base with salary cut.
As a consequence to the reduction in prices of diesel and petrol and the price cut effected by manufacturing sector already, the inflation is likely to bottom out at around 6% by the end of this fiscal and an economic recovery- the flip side of downturn- may well be conspicuous by the start of new fiscal year beginning April’09