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Advance tax figures show weak industrial growth

business Updated: Jun 16, 2011 00:39 IST
HT Correspondent
HT Correspondent
Hindustan Times
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Indian firms paid 14% more in advance taxes overall during the first quarter of this financial year (2011-12) rekindling hopes that the industrial slowdown may not be as bad as anticipated, but it is unlikely to deter the Reserve Bank of India (RBI) from raising interest rates to cool prices when it presents its mid-quarter review on Thursday.

India’s largest stock market-listed company Mukesh Ambani-led Reliance Industries Limited (RIL) paid Rs 900 crore as advance tax in April to June — up 38% from last year.

State Bank of India (SBI), the country’s largest lender, paid Rs 1,100 crore in advance taxes as compared with R850 crore in the year-ago period.

Companies pay advance tax every quarter based on their projected income of the year.

There were, however, signs of slowing of demand in consumer goods and key intermediate goods industries as reflected in the advance tax data.

India’s largest automobile company Tata Motors, paid a lower advance tax of Rs 62 crore as compared to Rs 65 crore in the previous year, while Tata Steel’s advance tax payout shrunk to Rs 280 crore from R300 crore in first quarter of the previous year.

Cement companies also paid lower advance taxes — in a possible sign of slower construction activity.

India’s wholesale prices based inflation surged to 9.06% in May, driven by costlier manufactured products bolstering speculation that the RBI may increase interest rates in its policy review on Thursday. A higher repo raises banks’ borrowing costs and prompting them to increase interest rate on final home, auto and corporate loans.

Industry chamber Ficci has urged the RBI to refrain from raising interest rates any further as it would slow down the pace of investments and hurt growth in the broader economy.

“Aggressive monetary tightening is having an adverse bearing on economic and industrial growth of the country,” Udayan Bose, chairman of Ficci’s corporate finance committee wrote in a letter to the RBI governor.