The fiscal year 2003-2004 (April-March) was wonderful for the Indian government, with unprecedented levels of tax collection.That inflow set new records for direct and indirect taxation and gave the government a lot of fiscal flexibility. But if the figures coming out of the Ministry of Finance for customs and excise revenues (indirect taxation) for the first six months (April-September) of the 2004-2005 fiscal year are any indication, then last years figures will easily be surpassed, with a new record set for government revenues in India.
Despite cuts in customs duties on crude oil imports by value, the largest imports into Indiathat cost the Indian government $1.1 billion in revenues for the first six months, indirect tax revenues are higher by 9.5% over the corresponding six-month period last year. For the first six months the indirect tax collection has been $15 billion, of which excise collections composed the larger chunk at $10 billion, recording a higher growth rate at 10.3%. Customs collections came in at a slower growth rate of 8.5%.
The government hopes to monetize foreign exchange reserves by issuing bonds to the Reserve Bank of India (RBI). For infrastructure projects, around 15% of the project cost accounted for by imported capital goods, thus the $5 billion capital subsidy, will generate activity in $30 billion to $35 billion worth of projects.