Growth Drive Will Lead to Grad­ual Pickup in Re­cov­ery

Lower in­ter­est rates will re­sult in im­proved bal­ance sheets EX­PERT TAKE

The Economic Times - - Front Page -

di­tional stim­u­lus of 15 bps to GDP.

Also, im­ple­men­ta­tion of pay com­mis­sion-rec­om­mended wage hikes for state gov­ern­ment staff and in­creased af­ford­able hous­ing ow­ing to flat prices over the past 3-4 years and lower in­ter­est rates (down 150 bps over the past two years) will but­tress the gov­ern­ment’s stim­u­lus mea­sures and set the econ­omy on its path of re­cov­ery.

Tax­a­tion re­forms and the gov­ern­ment’s scru­tiny of bank ac­counts that showed a steep rise in de­posits post de­mon­eti­sa­tion will lead to im­proved tax com­pli­ance and taxto-GDP ra­tio in the medium term.

The gov­ern­ment has re­duced cor­po­rate tax rate for com­pa­nies be­low ₹ 50 crore of rev­enues and in­di­vid­ual tax rates for in­come be­low ₹ 5 lakh and re­moved sev­eral ex­emp­tions from April 2017 in its quest to widen the direct tax base. It will im­ple­ment GST by July 2017 to sim­plify the in­di­rect tax sys­tem. We ex­pect a mean­ing­ful change in the be­hav­iour of tax­pay­ers given the ‘car­rot’ of lower tax rates and the ‘stick’ of de­mon­eti­sa­tion.

The gov­ern­ment has re­it­er­ated its medium-term goal of fis­cal con­sol­i­da­tion, though it pushed it back, for now, to fo­cus on growth. It tar­gets to reach a gross fis­cal deficit/GDP ra­tio of 3% by FY2019 (es­ti­mated at 3.2% for FY2018) against the orig­i­nal tar­get of FY2018.

Newspapers in English

Newspapers from India

© PressReader. All rights reserved.