The indirect tax revenue collections for this year may fall well short of estimates as rising input costs and costlier borrowing hurt corporate profitability forcing firms to defer planned investments amid signs of an industrial slowdown.

"You (tax officials) would need a growth of nearly 15%. The task before you is very challenging and will require sustained and strategic efforts throughout the (this) financial year," finance minister Pranab Mukherjee said, while addressing the annual conference of chief commissioners and directors general of central board of excise and customs (CBEC) on Wednesday.

The government has set an indirect tax revenue target of R3.92 lakh crore for 2011-12.

Finance secretary Sunil Mitra echoed the minister's opinion on slowdown in tax collections. "Meeting the revenue collection targets in 2011-12 will not be an easy task to accomplish," he said.

Mitra also said the economic growth rate is expected to be around 8.5 % lower than the budgeted projection of 9%.

Mukherjee said, it would be possible to achieve a growth rate of 8.75% (plus-minus 0.25%) with "hard work."

India's gross domestic product (GDP) grew by a respectable 8.5% for 2010-11 as a whole, but the last quarter (Janruary to March) saw staggering industrial slowdown, data released recently showed. The GDP grew 7.8% during January to March slowest pace in five quarters. The manufacturing sector grew by slow 5.5% in the quarter, as rising interest rates hurt consumption and investment. This will hurt growth as corporations defer planned investments and look for ways to cut costs.

Experts warned that as inflation stayed close to double digit levels it was 8.66% in April the Reserve bank of India (RBI), which has increased interest rates nine times in 13 months, has no new card to play but to raise interest rates further to tame prices.

"In light of still-high inflation, it is unlikely to prevent the RBI from hiking interest rates further," said Rajeev Malik, senior economist at Singapore-based broking and research firm CLSA.

Mukherjee also expressed concern over avoidable litigation with taxpayers which has been continuously growing over the years. "This is not a healthy trend and requires introspection especially about routine filing of appeals."

He said that a committee was appointed, which has recommended monetary limits for filing of appeals before the various appellate forums