Govt readies next round of measures on economy

The Prime Minister’s Office (PMO) and top officials of the finance ministry are working on administrative measures and incentive packages to boost the sluggish economy as the government is “deeply” concerned about the steep fall in key economic parameters besides dwindling revenue collections, three officials aware of the developments have said.

The PMO and the North Block have been conducting a series of meetings with central and state government officials to boost revenue generation, which is a necessary condition for prospective stimulus packages to create demand and induce consumption to boost the economy, they said.

One of the officials said that liquidity is no longer a major concern and the government has addressed investors’ sentiments by announcing unprecedented cuts in corporate tax rates by sacrificing ₹1.45 lakh crore. The government could now shift its focus to fuelling demand and stoking consumption, he said on condition of anonymity.

On the demand side, discussions are centred around reducing income tax rates sans exemptions, prodding banks to offer attractive EMIs for auto and housing loans, rejigging real estate laws and tax structure and reducing compliance cost for builders on the condition that the same could be passed on to consumers, the official said.

The government is also exploring some incentive to perk up automobile sales, the official added. It is, however, finding it difficult to cut GST on automobiles because states are unwilling to take about ₹60,000-crore revenue hit, he said. Other proposals being discussed include raising public investments in infrastructure, particularly in rural areas, and asking state-run firms to front-load their budgeted expenditure, he added.

The government is expecting demand to pick up because of some recent decisions. The cabinet on October 9 raised DA of five million central government employees and 6.5 million retired employees by 5 percentage points, hoping that the ₹10,600 crore-package will boost consumption in the ongoing festive season. “More such measures are expected, depending on the availability of funds,” another official said, asking not to be named.

According to a third official, intensive meetings on these issues took place at the PMO on Saturday and some of the meetings were also attended by finance minister Nirmala Sitharaman.

The PMO met senior officials of various states on Friday, prodding them to share the responsibility of GST collection, which dropped alarmingly in September, they said. The GST collection in September was ₹91,916 crore, lowest in 19 months and below ₹1 lakh crore consecutively for the second month.

The officials said the decline in GST collections also indicates a slowdown in the demand of goods and services, which has a direct bearing on the economic growth. India’s annual GDP growth in the quarter ending June 2019 was 5%, the lowest in 25 quarters. It also marked the fifth consecutive quarter of slowing growth in the Indian economy.

The government is concerned about the declining GDP growth, particularly after the RBI cut the country’s growth projection by 80 basis points .

WITH LIQUIDITY NO LONGER A MAJOR AREA OF CONCERN, THE GOVERNMENT COULD NOW SHIFT ITS FOCUS TO FUELLING DEMAND AND STOKING CONSUMPTION, SAID AN OFFICIAL