The decrease in the estimated target is on account of increase in input prices which had eroded the profit margin of firms and hence realizing Rs 392,908-crore in indirect tax collection will be quite challenging.
This is the first time when Mukherjee has expressed such concerns. While others had already lowered the estimate of GDP growth to around 8 per cent, FM is still estimating it to be around 8.75 per cent.
During the budget, FM announced an 18.5 per cent growth in gross revenues for this fiscal year which included a 17.4 per cent growth in indirect tax collections and a 19.4 per cent growth in direct tax receipts. With the concerns over the indirect tax collections, revenues will also not be realized as expected.
Rising crude oil prices, high Inflation and now lower than expected tax collections. All are posing a great risk to the government's target of achieving fiscal deficit of 4.6 per cent of GDP in 2011-12.