India reported 3.65 per cent increase in its direct tax collection for the first quarter of current financial year ended June30, 2009; driven by high base effect of significant growth in April-June 2008. The country's direct tax kitty grew over 38% in the first quarter of 2008-09.

A press release maintains, "Lower growth in net tax collection was mainly on account of higher tax refund outgo of 52.01 per cent at Rs 17,600 crore in the present quarter, against Rs 11,578 crore in the first quarter last fiscal."

The Union government has set a target of collecting direct tax in the range of Rs 3,70,000 crore, for which direct collection - a significant source of national income - needs to grow by at least 9 per cent. Any shortfall in tax collection will affect the country's growth due to widening fiscal deficit, pegged at 6.8% for the current fiscal.

KPMG Executive Director, Vikas Vasal said: "The first quarter of last financial year was better in terms of growth, so if we compare on a quarter-to-quarter basis, this figure is reasonable."

The government has already announced heavy borrowing, during the first half of current financial year, to meet its fiscal needs. It will further increase deficit, putting pressure on interest rates by making finance costly for the private sector. However, experts believe that there would be better tax collection in second half, amid signs of recovery of the market.