Many big and small measures have been taken in the last four years in the financial and economic sphere. As per the developments reported this week, indications of financial discipline setting in can be seen. It comes as a significant change since the times of huge financial mess left by the UPA government.
The positive trends that have been reported recently are: an upward trend in direct tax collection, Public Sector Banks showing signs of recovery, increase in the credit flow to the agriculture and MSME sector and paying back of debts by the big corporates who would earlier evade doing so.
Let’s look at all these instances one by one.
Direct Tax Collection- Upward Trend
The provisional figures of direct tax collections up to September 2018 (Half-yearly figures) show that the gross collections are at Rs. 5.47 lakh crore which is 16.7% higher than the gross collections for the corresponding period of last year. The main features are as below:
- Refunds to the tune of Rs 1.03 lakh crore have been issued from April 2018 to September 2018, which is 30.4% higher compared to the same period in the preceding year.
- Gross collection of Corporate Income Tax (CIT) grew at 19.5%
- Growth rate of Personal Income Tax (PIT) is at 19.1%
- After adjustment of refunds, the net growth in CIT collections is 18.7% and that in PIT collections is 14.9%.
- Rs 2.10 lakh crore has been collected as Advance Tax, which is 18.7% higher than the previous period.
All these reflect a rise in tax compliance which is good news for the economy. Apart from that it also shows the trust the taxpayers have on the present government. Consider the fact that yearly direct tax collection of 2013-14 stood at Rs 6.33 lakh crore. Now, compare this to the half-yearly direct tax collection of 2018 which has already reached Rs 5.47 lakh crore. In fact, a 2017 media report highlighted that there has been a fast rise in direct tax collection since 2013-14.
Not just that, the government has also installed a proper and fast refund system in place. April to September refund figure shows 28% growth over the corresponding figure of the previous financial year. Thus, it is evident that the mutual trust between the government and citizens has been growing strength to strength. A snapshot of the Ministry of Finance infographic is provided here.
PSB Losses Came Down
According to the rating agency, Crisil, “State-run lenders will narrow down their losses to Rs 50,000 crore in the fiscal year 2018-19, from Rs 85,000 crore in the previous fiscal year, as the quantum of dud loans reduce.”
Another report quotes Crisil saying, “profits for the entire banking system are expected to start improving from the second half of this fiscal.”
Whenever there is a talk of Public Sector Banks and their problem, a fact should always be remembered. It is the apparent unmindful lending under the UPA regime that resulted in the accumulation of bad debts. The total amount loaned by the banking sector was Rs. 18 lakh crores in first 60 years whereas, under the UPA government (2008-2014), the total disbursement stood at Rs. 52 lakh crores.
The present government recognised this problem and brought the essential laws like Insolvency and Bankruptcy Code. As the above report suggests the results are perhaps showing with the PSBs improving their position.
Where are the Loans Going?
As the Q1 of the current Financial Year 2018-19, credit growth figure reveals two important points.
- Lending to agriculture has witnessed a 12.7% increase in growth.
- Lending to Micro, Small & Medium Enterprises has witnessed a 10.5% increase in growth.
So, the government policy has been ensuring that these sectors which have been providing livelihood to large Indian populace get the essential credit amount.
Corporates Paying the Debt Back
As mentioned earlier, the NPA (Non-Performing Asset) mess was created by the previous UPA regime. But now, the Insolvency and Bankruptcy Code brought by the Modi government is helping the creditors led by the banks to recover the money from loan defaulters. Earlier the companies used either their clouts or the time-consuming legal process to stay away from paying their dues. As reported by media, an amount of Rs 1.1 lakh crore recovered from loan defaulters who were earlier unwilling to clear dues. Read our previous article Rs 1.1 lakh Crore Recovery from Loan Defaulters – What it Tells About Government’s Fight Against Crony Capitalism?
All the above instances essentially make a thing clear. The financial mess that was created by the previous administration has been addressed systematically in the last four years. With every passing day, a new era of financial discipline is setting in.