Finance panel grills FinMin on DeMo, state of economy

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On Monday, data showed factory output shrank 4.3 per cent, the lowest in almost 8 years highlighting the structural slowdown in the economy.

Economists and experts expect second-quarter growth - out on November 29 - may be lower than the six-year low of 5 per cent in the June quarter. The Reserve Bank of India (RBI) had said last month that growth may be marginally better at 5.3 per cent in the July-September period. The SBI said the growth could be 4.2 per cent in Q2 on low auto sales, and core sector growth.

Tax shortfalls are now imminent. Corporate tax collection has shown a growth of just 0.56 percent up to October as against a target of 15.4 percent for FY20. The budget has pegged the direct tax collections at Rs 13.35 lakh crore. Government expects close to Rs 2 lakh crore of tax shortfall this fiscal.

The poor economic situation and weak sales could pull down the overall direct tax collections by approximately Rs 1.2 lakh crore, inclusive of the hit on account of corporate tax reduction out of which around Rs 80,000 crore more is due to the new tax rate structure and the remaining on account of various direct taxes such as personal income tax collections shortfalls. These are not official public figures though, but estimates from the government on an analysis pointing to the dismal picture.

India's economic growth slumped to an over six-year low of 5 per cent in the first quarter ended June this fiscal due to slower consumer demand and private investment amid deteriorating global environment.

This has prompted many global agencies to cut India's GDP growth by various degrees for 2019-20.

The RBI, in October monetary policy review, had cut sharply its economic growth projection for the country for this fiscal to 6.1 per cent from 6.9 per cent earlier, expressing hope it will recover in the second half of 2019-20.

The government has recently announced a slew of measures, including a cut in corporate tax rate, capital infusion into public sector banks, setting up a Rs 25,000 crore fund to boost realty sector, among others, to boost the economy.

In a recent survey on the three years of demonetisation, economic slowdown was cited to be the most prominent negative impact of the sudden move by government.