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Reduced taxes and increased borrowing will be counterproductive for India in the long-run, a senior Finance Ministry official said on Monday.

Addressing the 61st SIAM Annual Convention here, Revenue Secretary Tarun Bajaj said that the Centre can not reduce taxes without knowing if the reduction will lead to a corresponding increase in automobile sales.

Citing the strained financial condition due to Covid-19 pandemic, he said that the Centre has borrowed Rs 12 lakh crore in 2020-21 and a similar amount will be borrowed this fiscal as well.

"If we reduce taxes and increase borrowing, it will come back to haunt us," he said.

Noting that the auto industry has made major contributions towards GDP growth, direct and indirect employment over the years, Bajaj said that he hoped to witness improved vehicle sales with the incentives of the scrappage policy.