1. Government mulls economic stimulus as GST stings growth, say reports

Government mulls economic stimulus as GST stings growth, say reports

The Indian government is learned to be assessing the need for stimulus to boost the economy, in the face of the slowing growth in an economy hit hard by the transition effect of GST, and growing concerns over non-tax revenues.

By: | Published: September 18, 2017 1:25 PM
The government is looking at various measures to provide a stimulus to the economy, both short-term and medium term, but hasn’t yet taken a call. (Image: Reuters)

The Indian government is learned to be assessing the need for stimulus to boost the economy, in the face of the slowing growth in an economy hit hard by the transition effect of GST, and growing concerns over non-tax revenues. The government is actively looking at options to stimulate the economy, TV news channels CNBC TV18 and ET Now reported on Monday, citing unidentified government sources.

However, the government seems to be constrained with a limited fiscal space, specially in the wake of lower earnings on the account of lower RBI dividend and spectrum receipts this year, the reports said. The government will weigh the need to create fiscal space to boost growth, but is yet to take a view on the FRBM (Fiscal Responsibility and Budget Management) path, the reports added.

Adding to the woes of the government is this year’s ambitious disinvestment target, which is unlikely to be met, although, it will try to come as close as possible to hitting it. The government is looking at various measures, both short-term and medium term, but hasn’t yet taken a call. The finance ministry and commerce ministry will look at ways to boost exports and narrow trade deficit, the reports added.

But even amid all the uncertainty of what exactly will be done, there is growing clamour for the need to support the economy, the reports said, adding that there is a recognition within the government that the transition to GST has indeed hurt economic growth.

Earlier last month, the government figures showed that India’s GDP growth disappointed for the second straight quarter, slowing down to a mere 5.7% in Ap-Jun and pitting the country behind China on the list of world’s fastest growing major economies. The 5.7% fiscal first quarter GDP growth was much lower than the 7.1% seen in the same quarter a year ago. It even slowed down from 6.1% in the preceding quarter. The government sought to put a major part of the blame for slowing growth on GST, saying that very high level of inventories drawdown and destocking happened as businesses rushed to clear the stocks ahead of the implementation of the ambitious tax reform.

One of the areas the government may also look at is the informal sector of the economy, and how to provide it access to the capital. Further, it is also hoping that the resolution of one-two large bankruptcy cases will temporarily avert the bank recapitalisation needs, and will improve the sentiment.

Earlier May, the government notified an ordinance for speedy resolutions of NPAs in efforts to deal with the problem of India’s chronic bad loans, which have surged to to Rs 9.63 lakh crore. According to the RBI, top 12 bad loan accounts make up for Rs 2.5 lakh crore of bad debts, or 25% of the total. The ordinance gave powers to the RBI to direct banks to initiate bankruptcy proceedings against bad debt accounts under the Insolvency and Bankruptcy Code 2016 (IBC).

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  1. S
    Sadasivan
    Sep 18, 2017 at 5:23 pm
    Rupee will fall. Shares will rise and the FPIs will mint money in Stocks,Currencies and debt Markets. These at the cost of the Middle Class and the poor increasing the Rich Poor Gap,by loss of the purchasing power of the Rupee,like when M M singh did it full blast.. Hyper Inflation will result as was the case when M M Singh did the same on the diktat of the US and the IMF, in 2009.Selective stimuli like Credit to small businesses will be good.Not full stimulus/stimuli. I request Shri Modi Ji to NOT do opposite things on the diktat of the IMF and other bankers who are interested in Boom Bust Cycle always to mint money.The losers will be India's poor.Middle class. India had huge Debt to WB,IMF,DB etc [ US Dollars 175 Billion in 2013/2014]. ,India Inc's external Debt.these will make India incur heavy losses Prin l and Interest.
    Reply
    1. S
      Sadasivan
      Sep 18, 2017 at 5:02 pm
      l The Boom-Bust policy of the Bankers. First demonetization and then stimuli. India is NOT ready for GST,Digitization etc.IMF nd G 20 do not wish India well,especially its Middle Class and the poor,on which they demand austerity via taxation,removal of subsidies etc..Following its [ the IMF's ],G 20's,CFR's and US' diktat will shatter India.Too many risky things[ read bad for India ] were done in rapid succession,on the diktat of the Globalist Elites,who do not wish India well but to conquer her .financially, economically,Diplomatically,culturally,socially and many other means,like via fake Sports results.. FPIs' and MNCs' profit in Stock Markets and Businesses, is great concern for the Globalist Elites,who themselves mint money in Stocks etc. Illiteracy and rampant Poverty, impede internet usage and hence people re NOT net or Digital savvy. I hope our beloved Shri Modi Ji will stop listening to them and stop dong exact opposite things,one after the other NULLIFYing things
      Reply
      1. vivek gupta
        Sep 18, 2017 at 1:32 pm
        Where ever in world GST was introduced first 1-2 year was not good then it improves to higher trajectory. Seems like India will not be exception either
        Reply
        1. A
          Anisha
          Sep 27, 2017 at 10:50 pm
          Thats factually incorrect.. Which country are you talking about
          Reply

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