​Indian Govt has no space to accelerate spending: Nomura

Even after registering handsome growth in indirect taxes in the first five months of this fiscal year, the Indian government does not have much space to accelerate spending beyond the budgetary allocations because the Centre’s planned divestment is lagging behind targets, Japanese investment bank Nomura told The Economic Times.

In a report titled 'No room for extra spending' Nomura economists Sonal Varma and Neha Saraf told the business daily that another reason owing to which the BJP government cannot accelerate capital spending is a slower than budgeted direct tax growth in the country.

The report further added that during the first five months (April-August) of the current fiscal year ending March 2016, indirect taxes zoomed by 36.2% year on year (YoY), which is almost the double of the budgeted target growth of around 19%.

On the contrary, the direct taxes growth has been poor as it remained at just 8.5% YoY in the same period. And this is almost half of the targeted 16.1% growth, Nomura revealed.

According to the Japanese investment bank, "While indirect tax collections have been buoyant, we expect them to largely compensate for the potential shortfalls in direct taxes and disinvestment targets. Yesterday, the government also announced that it expects a 5-7% shortfall in direct tax collections (around 50,000 crore or 0.4% of GDP). As such, we do not expect any fiscal space to open up to spend above budgeted amounts."

Owing to higher public spending on infrastructure, the Modi government’s spending has already accelerated (up 8.8% YoY in April-August as against budgeted growth of 8.1%). But now, there is no space to accelerate this spending further.
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