The RBI's 25 basis points policy rate hike may well help anchor inflationary expectations, but it could add to the worries of those at the helm of the revenue department.
Sluggish industrial output growth coupled with higher interest rates is Likely to dent growth in corporate tax collections this fiscal, fear officials in the revenue department.
“I am worried about the likelihood of a slight slowdown in the corporate tax growth rate. Now again, the RBI came out with an announcement of rate increase. We have to see how this works out,” Mr Sunil Mitra, Finance Secretary, told newspersons on the sidelines of an event here.
Factory output growth, measured in terms of index of industrial production (IIP), slowed down to 6.3 per cent in April 2011, from 13.1 per cent in the same month last year.
While there may be some concerns on the corporate tax growth rate front, Mr Mitra however noted that the Government was on a strong footing on the personal income-tax front.
There are indications of a slowdown in the growth rate in overall corporate advance tax payout for the first instalment this fiscal. The Central Board of Direct Taxes (CBDT) is yet to compile the data on a national basis for Corporate India.
Economic growth
Meanwhile, Mr R. Gopalan, Secretary, Economic Affairs, separately told newspersons that economic growth is going to be affected to some extent by the central bank's monetary policy actions.
“Growth is also affected by inflation. If we leave inflation unattended that will also affect growth. One way of looking at it is that monetary policy should anchor inflationary expectations and those inflationary expectations are brought down. Especially when core inflation has gone up, monetary policy is good tool to address it,” he said.