Hindustan Times (Lucknow)

Govt working on reviving economy: FM

- Asit Ranjan Mishra asit.m@livemint.com

NEWDELHI: Finance minister Arun Jaitley said his ministry would soon announce measures to revive economic growth that has decelerate­d to the slowest pace in three years.

Jaitley’s comments come against the background of the most serious economic challenge the government has faced since it came to power in 2014. India’s gross domestic product (GDP) growth slowed to 5.7% in the quarter ended June, the slowest in three years, from 6.1% in the preceding three months, sparking concern over the state of the economy.

The residual impact of the November invalidati­on of highvalue banknotes and the 1 July implementa­tion of the goods and services tax (GST) were seen as contributi­ng factors. Current account deficit at a four-year high (2.4% of GDP in Q1 FY18) and rising retail inflation have further exacerbate­d the macroecono­mic situation.

On Tuesday, Jaitley chaired a meeting to discuss the situation and find solutions to the problem. The meeting was attended by railway minister Piyush Goyal, commerce and industry minister Suresh Prabhu and the secretarie­s of the finance and commerce and industry ministries. The railway board chairman and representa­tives from the Prime Minister’s Office and NITI Aayog, the government’s policy think tank, were also in attendance.

Jaitley said the measures would be announced soon, after consulting Prime Minister Narendra Modi.

There has been speculatio­n that the revival package could include incentives for exporters, fiscal sops and investment­s in large infrastruc­ture projects. Reviving economic growth and creating more jobs, promises that the ruling Bharatiya Janata Party made to come to power in 2014, are crucial as the party seeks re-election in 2019.

D.K. Srivastava, chief policy adviser at EY India, said the government may announce fiscally expansiona­ry programmes without breaching the 3.2% (of GDP) fiscal deficit target for 2017-18.

Public investment has become the foundation of growth... Cutting it would mean cutting down allocation­s for social sector and infrastruc­ture schemes. ARUN JAITLEY, finance minister

“Public and department­al enterprise­s that can spend on infrastruc­ture may be asked to speed up and enhance their capex (capital expenditur­e) plans for the year. The central government may also co-opt some state government­s to work towards this objective.”

The government is already at 92% of its full-year fiscal deficit target in the first four months (April-July) of 2017-18 and may find it difficult to spend beyond its budgetary means this fiscal, Srivastava added.

Low oil prices have helped the government, which has not reduced the retail price of petrol and diesel, instead increasing levies on fuel.

It has used this money to balance the fisc and spend on developmen­t programmes—a sound macroecono­mic move, according to many economists.

Still, a recent increase in oil prices, coming in the wake of weak economic data, has resulted in a wave of criticism being directed at the government. It doesn’t help that the Bharatiya Janata Party had made fuel prices a big issue when the Congress-led United Progressiv­e Alliance was in power.

Jaitley defended the levies on fuel.

“Funds for public investment are coming from resources such as excise duty on petrol and diesel.

Public investment has become the foundation of growth at a time when private investment is low. Cutting those iestments would mean cutting down allocation­s for social sector and infrastruc­ture schemes,” he said.

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