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Thursday, February 20


Government plans to offer fiscal balm for battered sectors

Government plans to offer fiscal balm for battered sectors

Mangalore Today News Network

New Delhi, Aug 17, 2019 : The government has swung into action after battered automobile and realty sectors piled up economic woes and threatened to cut more jobs, and a July 5 Budget announcement forced foreign investors to flee Indian markets, Deccan Herald reported.


govt17aug 19Plans are being firmed up at the highest level in the Ministry of Finance in consultation with the Prime Minister’s Office on tax concessions, preferably under the goods and services tax, relaxation in rules and even a mild fiscal stimulus that can be a positive sentiment for businesses and the market.

The banks are also being nudged to up their lending after carefully assessing their bad loans and other liabilities. Official sources said the government has lined up several meetings between various ministries as also with public sector bank heads over the weekend to look for ways to ameliorate troubles in job-creating sectors.

Consultations are also being held with the law ministry on an immediate relief under the Income Tax Act to foreign investors who, after the Union Budget announcement on a surcharge, have been moving out of India to more lucrative markets. “The sectors battling slowdown should hear something positive by the weekend or early next week,” an official told DH.

In Ahmedabad, Finance Minister Nirmala Sitharaman too indicated some kind of economic package and a roadmap for sectors including telecommunication.

While the automobile sector is seeking a rate cut from 28% to 18% under the GST regime, the housing industry — suffering a cash crunch in the wake of a crisis in the non-banking finance companies (NBFCs) — wishes an increase in bank lending to give more money in the hands of consumers.

But the government is constrained by reduced tax collections and choppy non-tax revenues in a slowing economy. Adding to its woes is a tight fiscal policy roadmap announced in the Union Budget that may be prohibiting the Centre from announcing any fiscal stimulus.

The only silver lining at present appears to be a close to 9% higher GST revenue collection this fiscal year so far compared to the previous one. That is expected to provide some cushion should the government decide to reduce GST rates for the auto sector.

But a back-of-the-envelop calculation suggests that a 10% reduction in GST rates for automobiles could cost the exchequer an extra Rs 50,000 crore every year.

The slowdown in FMCG (fast-moving consumer goods) sector, including white goods, leather and textile, may need a one-time fiscal stimulus, but the fear is that the step may force the government to breach its fiscal deficit target if tax revenues do not pick up in the next six months.

Four back-to-back policy interest rate cuts by the Reserve Bank of India and other liquidity enhancing measures since February this year have not helped the borrowers much. Now, the Centre is planning to ask the banks to vigorously work on rate transmission to loan seekers.

Besides, the government is also planning to up its expenditure, which could not take off in the first four months of the year due to parliamentary elections and their aftermath.

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