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Mint
16 hours ago
- Business
- Mint
India's current account deficit likely to widen in Q4 and subsequent quarters
A host of factors including India's growing trade deficit in the face of surplus factory capacity in China, uncertainty from the US reciprocal tariffs announcement, short-term foreign capital outflows, weaker remittances due to a slowing global economy, and the potential headwinds from US President Donald Trump's proposed tax on remittances could lead to a widening of India's current account deficit (CAD), experts said. This widening is expected in Q4FY25 and subsequent quarters unless there's a change in macroeconomic fundamentals, they added. To be sure, the CAD rose marginally to $11.5 billion, or 1.1% of GDP, in the October-December 2024 quarter (Q3FY25) from $10.4 billion, or 1.1% of GDP, a year earlier, despite strong growth in service exports. A widening current account deficit would put pressure on the rupee and inflate costs for businesses On a sequential basis, the CAD moderated from $16.7 billion (1.8% of GDP) in Q2FY25, according to the latest data released by the Reserve Bank of India (RBI) in March. India's merchandise trade deficit rose to a five-month high of $26.42 billion in April on the back of higher imports, even as exports rose, according to the provisional data released by the commerce ministry last month. Interestingly, the latest GST data revealed a sharp surge in imports in May. While net domestic GST revenue (after refunds) grew 9.7%, matching April's pace, net customs revenue from IGST and cess on imports soared 73% in May, a stark contrast to the modest 5.2% growth recorded the previous month. 'There is a risk of the current account and trade deficits widening this year, along with short-term foreign capital outflows as US yields rise,' said Bhanumurthy N.R., director at the Madras School of Economics. 'A global economic slowdown and the proposed US tax on remittances could also weigh on remittance inflows, adding further pressure to the external account,' he said. On Monday the yield on the benchmark US 10-year notes rose 3.2 basis points to 4.45%, while the 30-year bond yield increased 4.6 basis points to 4.98%. In contrast, Indian 10-year government bonds currently yield 6.22%. Global uncertainties are prompting investors to favour safer, higher-yielding US bonds over emerging-market debt. Fiscal year 2025 began with strong foreign investor inflows of around ₹ 28,000 crore but saw a sharp reversal in the second half, with over ₹ 2 trillion sold off, resulting in net outflows of about ₹ 1.53 trillion ($17.8 billion) for the year. Meanwhile, the Trump administration has proposed a 5% excise tax on outward remittances, which would affect millions of individuals, including green card holders and workers on H1B visas. Remittances, defined by the World Bank as funds sent from a person working abroad to their home country, are typically personal transfers between family members or individuals. 'A further rate cut by the central bank could push government bond yields lower, potentially driving more foreign capital toward higher-yielding US bonds,' Bhanumurthy added. According to a recent report by the Union Bank of India, India's CAD is expected to widen to 1.2% of GDP in FY26 from an estimated 0.9% in FY25, with the outlook for exports remaining uncertain due to the looming threat of reciprocal tariffs by the US on trading partners. It added that despite a 90-day pause on the reciprocal tariffs, India's export outlook remains uncertain. A spokesperson for the ministry of finance didn't respond to Mint's emailed queries. Meanwhile, subdued oil prices and a sharp rise in gold—driven by central banks hedging against dollar volatility— could reshape India's import mix. Despite stable crude prices through most of FY25, India's crude oil imports rose by 4.2% to 242.4 million tonnes (MT) from 232.7 MT in FY24, according to official data. This 9.7 MT increase pushed the country's import dependency slightly higher—from 88.6% in March 2024 to 89.1% in March 2025—highlighting continued reliance on overseas energy supplies. The rise in volumes, along with a modest uptick in global prices during parts of the year, drove the import bill for crude and petroleum products to $161 billion in FY25 from $156.3 billion in the previous fiscal year. Crude prices, however, have softened notably in the first two months of FY26. The Indian basket of crude—a mix of sour and sweet grades—fell from $67.73 per barrel in April 2025 to $64.04 in May, a decline of $3.69 per barrel. "For the central government, crude oil prices in the range of $60-$65 per barrel are comfortable and allow us to build adequate buffer stocks," said a senior official, who did not wish to be named. "At these price levels, we will not only meet our energy needs more affordably but also strengthen energy security," the official added. Meanwhile, petroleum product demand continues to rise, with estimates from the Petroleum Planning and Analysis Cell (PPAC) projecting record consumption of 252.9 MT in FY26, up 4.6% year-on-year. Gold is also gaining weight in the import mix. In April, India's gold imports rose 7.6% year-on-year to ₹ 26,499 crore as central banks worldwide stepped up buying amid dollar uncertainty and investors turned to the metal as a safe haven.
Time of India
2 days ago
- Business
- Time of India
Andhra Pradesh marks growth in GST revenue in this year's 1st quarter so far
Vijayawada: Andhra Pradesh has demonstrated remarkable resilience and efficiency in tax collection. It has successfully reversed the downward trend that was observed in November and December, 2024. The state achieved sustained growth in GST revenue during the first quarter of 2025, with April emerging as an exceptional month for revenue collection. This May, net GST collections reached ₹2,714 crore. This was the highest amount collected for the month of May since the introduction of GST. The performance not only signifies effective tax administration but also reflects the positive economic momentum in the state. "The steady increase in tax revenue underscores strength of the state's financial framework and the success of various initiatives designed to enhance tax compliance and enforcement," said Babu A, AP chief commissioner of taxes. This growth in net collections is particularly significant because net revenue represents the actual revenue accrued to the state after accounting for IGST settlements and other components. While gross collections reflect the total tax paid, net collections provide a more accurate indicator of the state's fiscal health by considering the revenues available for state expenditures. The gross GST collections for May, 2025 have registered a negative growth of (-) 2.24%. The main reason for the negative growth is the negative collection in cess, SGST and CGST payment with a decline of ₹52 crore (- 20.02%), ₹51 crore (-4.11%), and ₹40 crore (-4.01%), respectively. However, the overall impact of these negative cess and CGST growth is minimal on the state's actual revenue, as net revenue collections continue to demonstrate strong performance. "The resilience of net collections underscores the effectiveness of state-level tax administration and enforcement efforts in ensuring steady revenue inflows," said Babu. According to data from the Goods and Service Tax Network (GSTN), Central and State tax administrations showed divergent revenue trends during April-May this year. Central tax collections declined by 7.2% year-over-year, while state tax administrations recorded 3.2% growth during the same period. Without the central tax administration's negative performance, the overall gross GST collections would have shown a 3%+ growth rate instead of being dragged down by the central component.
Mint
3 days ago
- Business
- Mint
₹2 trillion GST revenue in May, points to strong consumer sentiment, dumping concerns
New Delhi: Central and state governments collected over ₹2 trillion in Goods and Services Taxes (GST) in May before adjusting for refunds, official data showed on Sunday, a 16% annual improvement that sustains the robust tax performance seen in the previous month. The collections in May also benefited from the strong 25% growth in gross receipt of Integrated GST or IGST—the type of GST levied on imported goods, showing strong import value growth at the beginning of the current financial year amid trade uncertainty. In April too, IGST on imports had grown nearly 21% before refunds, compared with a 13.6% growth in March, prompting some experts to flag the possibility of dumping of goods into India by other countries as the Trump tariff announcement came in April. Also read: Government drove capex in pre-election year as private sector held back IGST accounted for about a fourth of gross GST revenue in May. GST collections from domestic sales too witnessed a strong 13.7% growth in May, faster than the 10.1% nominal GDP growth the Central government has forecast, suggesting strong consumer sentiments. Data also showed that industrialized states barring Gujarat, reported strong growth performance. While the largest state economy, Maharashtra, reported a 17% annual growth in GST revenue, Tamil Nadu reported a 25% jump, Karnataka 20% and Delhi 38%. Gujarat reported a muted 4% annual growth in May. After adjusting for tax refunds, Centre and states collected ₹1.74 trillion in May, 20.4% more than the revenue collected in the same time a year ago. In the first two months of the current financial year, net GST revenue of Centre and states grew at an average of 14%, faster than the projected nominal GDP growth for the current year. Signs of dumping? After refunds, net domestic GST revenue grew at 9.7% in May, nearly the same as in April, but the net customs revenue in May— IGST and cess on imports—grew at a spectacular 73% in May, compared with an unimpressive 5.2% in the previous month. Also read: Tax rate revamp on GST Council agenda; India to push FATF to grey list Pakistan The growth in IGST revenue from imports and the fact that export refunds are not growing correspondingly, reflect the fact that import growth far outstrips export growth, explained Vivek Jalan, founder and partner at Tax Connect Advisory Services LLP. The taxes paid on goods and services used in the products that are exported are refunded to exporters to make shipments competitive, as per policy. 'This may be a result of Trump 2.0 in as much that countries are dumping their goods in India, as they are selling less in the US. It may be required that India too may have to reciprocate, or react with anti-dumping duties in the near future on a variety of products," said Jalan. At the same time, sustained growth in the consumption tax revenue indicated positive consumer sentiments. To boost demand for goods and services in the economy, the government had announced a tax cut for middle-income earners in this year's budget which was estimated to cost the exchequer ₹1 trillion by way of forgone income tax receipts. Policymakers are also counting on above-normal monsoon, strong agriculture growth, growth supportive monetary policy and government capital expenditure to support economic growth this year. Also read: Lenders willing to offer lower rates to distressed firms since IBC took effect, says insolvency board M.S. Mani, partner indirect taxes, Deloitte India, said that tax collection in May which is better than the average monthly GST receipt in the last financial year, would provide significant fiscal headroom for the government. After refunds, the Central government collected over ₹31,000 crore, while states collected over ₹38,500 crore. Cess on luxury goods, aerated drinks and tobacco yielded ₹12,400 crore in May.
Time of India
7 days ago
- Business
- Time of India
DRI arrests 2 in Rs 60 crore luxury furniture import scam in Mumbai
MUMBAI: The Directorate of Revenue Intelligence (DRI), Mumbai, arrested two directors of an import firm for their alleged involvement in the gross undervaluation of luxury furniture imports amounting to Rs 60 crore and evasion of various duties worth over Rs 20 crore. The DRI arrested Rizwan Iqbal Chunawala (49), the proprietor of Design Decode, and Sajid Hanif Jada (44), the ICE holder of Design Decode, under the Customs Act. Acting on specific intelligence, DRI officials launched an investigation into M/s Design Decode, an importer operating under Importer Exporter Code, which allegedly consistently undervalued branded luxury furniture consignments imported from overseas suppliers since September 2021. During searches conducted at multiple premises, including the operational address of M/s Design Decode at Laxmi Industrial Estate, Andheri, officers recovered incriminating documents. The recovered documents pointed towards systematic undervaluation and document manipulation aimed at evading customs duty, Integrated Goods and Services Tax (IGST), and Social Welfare Surcharge (SWS). Since its inception, the importer imported consignments via 392 bills of entry amounting to a declared value of Rs 24 crore, whose actual value is worth ₹60 crore, resulting in huge evasion of import duties of Rs 20 crore, including customs duty, IGST, and SWS. by Taboola by Taboola Sponsored Links Sponsored Links Promoted Links Promoted Links You May Like Truque caseiro eficaz contra o bigode chinês (faça hoje mesmo) Notícias | Beleza | Mulher Saiba Mais Undo Chunawala admitted that M/s Design Decode was essentially a front created to import goods on behalf of Defurn Furniture Studio. He acknowledged being fully aware of the undervaluation scheme and confessed to playing an active role for personal financial gains. Jada also admitted his role in managing the warehouses where the undervalued imports were stored before delivery. The DRI revealed that since its inception, M/s Design Decode imported 392 consignments with substantially undervalued invoices. Based on re-determined valuations, the total value of the imports is estimated at ₹60 crore, against which duties amounting to approximately Rs 20 crore were evaded.
Time of India
27-05-2025
- Business
- Time of India
2-0 Modi's manufacturing moment: From locomotives to aerospace, India's ambitions take flight
India is quietly—and quite deliberately—rebranding itself on the global stage. From locomotives to aerospace components, India is no longer content with being the world's back office or a domestic-only manufacturer—it's gearing up for exports. On track to build big Prime Minister Modi's recent visit to Gujarat wasn't just a ribbon-cutting ceremony—it was a signal. The inauguration of the Dahod locomotive manufacturing plant in Gujarat and the rollout of a domestically built electric engine are clear signals of intent. The new locomotives aren't just made in India—they're made for the world. According to The Tribune, they're headed to European and African markets. by Taboola by Taboola Sponsored Links Sponsored Links Promoted Links Promoted Links You May Like Play War Thunder now for free War Thunder Play Now Undo These aren't legacy diesel machines—they come with regenerative braking systems aimed at improving energy efficiency. And there's more fuel in the tank. Indian Railways recently bagged a Rs 2,000 crore order from Guinea for 140 diesel locomotives, to be built at the Marhowrah plant in Bihar. It's one of the largest railway export deals in India's history—a clear signal that India wishes to become a serious player in global rolling stock. Live Events Wings of ambition: Aerospace takes off If the railways are gathering speed, the aerospace sector is hitting altitude. Civil Aviation Secretary Sameer Kumar Sinha says global OEMs now source over $2 billion annually in aerospace components and services from India. The All India Association of Industries pegs the domestic aerospace and defense market at a potential $70 billion by 2030. Enter the Aerospace India Association (AIA)—a newly launched apex body tasked with multiplying India's aerospace exports tenfold, from under $2 billion today to $20 billion within a decade. Ambitious? Certainly. But well in sync with India's now-familiar pattern of big manufacturing bets. Civil Aviation Minister K. Rammohan Naidu outlined the government's roadmap: build resilient supply chains, promote indigenous manufacturing, and transform India into a global aviation hub. A key part of that plan? A competitive aerospace supply base, and accelerating India's own regional aircraft programme. Complementing this export push is a long-overdue tax reform that could unlock serious potential in the aviation services space. To bolster India's standing as a global Maintenance, Repair, and Overhaul (MRO) hub, the government, in July last year, implemented a uniform 5 per cent IGST on all aircraft and engine parts. The MRO sector had been weighed down by a patchwork of GST rates—ranging from 5 per cent to 28 per cent—which resulted in an inverted duty structure and clogged input tax credits. The new regime simplified the tax landscape, and aligns with the government's broader ambition to make India a credible player in aviation manufacturing and services. PLI + Engineers = Export engine What's fuelling this ascent? A cocktail of low labor costs, a high volume of engineering grads, and generous government support through Production Linked Incentives (PLIs). If the acronym sounds dull, the results aren't: PLIs are making it increasingly irresistible for global giants to shift their supply chains to India. Litmus test for India's manufacturing capacity Of course, the journey from 'Make in India' to 'Made for the World' isn't without friction. Winning orders is one thing—meeting global benchmarks on quality, consistency, and turnaround time is another. And external variables like trade wars or geopolitical tensions could jolt supply chains.
