Tag: stimulus

Modi govt likely to miss fiscal deficit target amid pressure for more stimulus

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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India is likely to miss its fiscal deficit target for the current financial year, despite receiving an additional dividend from the Reserve Bank of India (RBI), five government officials and advisers said, as tax collections have sunk amid a sharp slowdown.

With economic growth falling to a six-year low of 5 percent in the April-June quarter, the sources said the government could toward the end of 2019 be forced to raise the fiscal deficit target to 3.5 percent of GDP from 3.3 percent, amid pressure for additional stimulus measures.

The officials asked not to be identified as they have not been authorized to discuss the matter with media.

A Finance Ministry spokesman did not immediately respond to requests for comment.

Tax collections could fall by as much as 1 trillion rupees ($14 billion), or 4 percent of $344 billion annual target, two of the officials said, noting that sharp shortfalls are expected both in goods and services tax (GST) and income tax collections.

For an interactive graphic, click https://tmsnrt.rs/2PHP4KG

“Overshooting the fiscal deficit target is inevitable this year as the economic slowdown has hit government revenue,” a senior adviser said, adding the deficit would rise unless the government resorts to hefty spending cuts.

Separately, a finance ministry official said plans to sell minority stakes in some state-run entities including electricity producer NTPC, state insurer General Insurance Corp and construction finance company HUDCO could be deferred, as market sentiment has weakened.

Two government advisers said they have also urged the Prime Minister Narendra Modi-led government to defer the fiscal target to tackle the economic slowdown and outline stimulus steps to help the hard hit sectors such as autos and textiles.

DOWNWARD REVISIONS

Private economists have revised growth forecasts to as low as 5.8% for 2019/20, one percentage point lower than the prior year, saying the slowdown could persist for two or three years while much needed cyclical as well as structural reforms are put in place.

The flat manufacturing sector growth of 0.6 percent during the April-June period, and contraction in the auto sector by nearly 30 percent in July, has hit GST and corporate tax collections, while consumer spending cuts amid job losses have dented revenue collections.

So far, the government has resisted pressure to announce a big bang stimulus package while nudging the RBI to cut its benchmark repo rate, which is already down 110 basis points since February.

Another government adviser said despite receiving a bonanza of around $8 billion in extra dividends from the RBI, the fiscal deficit would rise as nominal GDP growth has fallen well below the budgeted estimate for the fiscal year.

Policy advisers fear that the government’s recently outlined plan to merge 10 state-run banks into four mega banks this year, could also prove to be a distraction for bankers, reducing their focus on credit growth, delaying recoveries on bad loans, and in turn impacting their profits and their dividend payouts to the government.

In 2018/19, government revenue receipts fell 11 percent against the budgeted target, and the government resorted to spending cuts of 1.46 trillion rupees ($20.42 billion), and the deficit rose 3.4 percent of GDP against the initial target of 3.3 percent.

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KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Key quotes from FM Nirmala Sitharaman: Measures to achieve higher economic growth

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Here are some of the key quotes from finance minister Nirmala Sitharaman on measures to achieve higher economic growth:

On supporting honest decision making in banks

“In order to support decision making and to prevent harassment for genuine commercial decision by bankers, the CVC has issued directions that internal advisory committee (IAC) in banks to classify cases as vigilance and non-vigilance. Decision by the IAC and the banks chief vigilance officers to be treated as final. So, because that happens there and then decision taking risk will not be any more laden in their heads. So, we expect that will protect honest decision making in the banks.”

On credit support for purchase of houses

“More credit support for purchase of houses, vehicles and for consumption goods. How are we doing this, additional liquidity support for Home Finance Corporations (HFCs) for Rs 20,000 crores by the National Housing Bank (NHB) and thereby increasing it to Rs 30,000 crore which is an increase which we are making now. Partial credit guarantee scheme for purchase of pooled assets of NBFCs and Home Finance Corporations up to Rs 1 lakh crore to be monitored at the highest level in each of the banks.”

ALSO READ: FM Nirmala Sitharaman announces FPI relief, boost for PSBs, sops for motown

On lending a helping hand to NBFCs

“NBFCs will now be permitted to use Aadhar authenticated bank KYC to avoid repeated processes. To take advantage of the liquidity that which is there with the PSBs and the last mile consumers connect that the NBFCs have so that PSBs can fast-track collaboration for loans particularly to the MSMEs, so the co-origination is the rules or requirements of the banks will apply even in the context of the NFBC where the requirement probably do not exist or are harsher. So this will work together and bring in the synergy between the NBFCs and the banks so that where the NBFCs are present the banks advantages will reach and where there are no NBFCs the banks themselves can push it forward.”

On GST refunds for MSMEs

“It was rampantly heard from a lot of MSMEs saying that our refunds are stuck, we are not sure when we will get it, will you give it? This is clearly time bound now. All pending GST refunds due to MSMEs till now shall be paid within 30 days. Everything that is pending from the time of introduction of GST, from then till today whoever has got a pending refund problem, it will be sorted out within 30 days from today. For future GST refunds for MSMEs, every GST refund matter will be sorted out within 60 days after it arises.”

On MSME definition

MSME Act, we are addressing that issue because the MSME Act will now go to the cabinet with inputs taken from all of the ministries concerned just so there is one meaningful definition through which companies now can feel a lot more at ease with their business activity.UK Sinha Committee has come up with lot of recommendations, many of which are already on board. We shall ensure decisions on recommendations such as on ease of credit, marketing, technology, delayed payments etc. are all addressed at the earliest.

On shifting gears for the auto sector

“BS IV vehicles which are purchased up to March 31 2020 will all remain operational for their entire period of registration. So it is not as if from 2020 BS IV vehicles are all of the road, not at all. As long as their registration is on, it will be allowed and they will be as good as any other vehicle.”

On increasing capital flows and energising financial markets

“In India there is a need for deepening bond markets. In order to improve access to long term finance, it is proposed to establish an organisation to provide credit enhancement for infrastructure and housing projects. This would enhance debt flow towards such projects. The name of the organisation will be in a day or two revealed but that organisation will take care of providing credit enhancement facility for infrastructure and other housing projects. The government would soon take further action on development of credit default swap markets in consultation with RBI and SEBI. In order to improve domestic markets in bonds ministry of finance will work with RBI to make it more conducive for investors and for bond issuers as well as facilitate increased trading for price discovery – a lot more open market driven kind of a price discovery mechanism.”

On Aadhaar based KYC for demat accounts

“In order to improve market access for the domestic retail investors, Aadhaar based KYC to be permitted for opening demat accounts and making investment in mutual funds. Necessary notification for amendments in the PMLA rules will be issued sooner.”

Follow our complete coverage of measures announced by finance minister Nirmala Sitharaman here.

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KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

FM Sitharaman says more reforms in the next 15 days

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Finance Minister Nirmala Sitharaman announced a slew of measures to boost the slowing economy of the country.

She also said that this was not the end and that the government was working with experts and industry representatives to better the situation further.

KEY HIGHLIGHTS: The six announcements by FM Sitharaman

The finance minister said, “Next week we will be coming with one more set of announcement. You may expect us to talk to you twice more in the near future.”

When asked to elaborate, she said that next week would most probably see relief announcements for new home buyers.

Follow our complete coverage of measures announced by finance minister Nirmala Sitharaman here.

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KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

FM Nirmala Sitharaman announces FPI relief, boost for PSBs, sops for motown

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Finance Minister Nirmala Sitharaman addressed the media on the state of the economy on Friday.

She started by saying that reforms were the top focus of this government and an ongoing endeavour.

The Finance Minister’s first announcement was that CSR violations would not be treated as a criminal offence but a cilvil one.

Her second announcement was a big and expected one. The government has withdrawn the enhanced surcharge on gains by FPIs and domestic investors.

In July, the Indian equity markets bled as FPIs turned net sellers, withdrawing Rs 12,419 crore from the market. Sitharaman had held consultations earlier this month with stakeholders to hear their problems.

The third announcement was that there will be no angel tax on start-ups registered with DPIIT (Department of Industrial Policy and Promotion).

The fourth announecment was regarding the banking industry.  Home and auto (secured) loans will now become cheaper as banks’s lending rates will now be linked with MCLR ( Marginal Cost of Funds based Lending Rate)

On the subject of customer ease, the finance minister announced that loan documents will now be given back to the customers within 15 days of loan closure.

The next step announced by the finance minister was on supporting NBFCs (Non-bank financial institution) and HFCs . Additional liquidity to housing finance companies  by NHB has been increased from Rs 20,000 cr to Rs 30,000 crore.

On the subject of pending GST refunds to MSMEs, the finance minister announced that  all pending due would be cleared in the next 30 days. Going forward she also said that refunds would be paid within 60 days from the date of application.

MSME (Micro Small & Medium Enterprises) definition has been a debated subject. The finance minister announced that the MSME Act will be ammended soon and a single definition for MSME would be announced.

Late payment of  dues by the  government has been a constant complain by teh industry. The finance minister announced that a committee would monitor this going forward so that the liquidity situation in the country would improve.

Nirmala Sitharaman also announced a new task force which would handle Rs 100 lakh crore for developing modern infrastructrure in the next five years.

Coming to the auto sector, the FM clarified that BS-4 vehicles can be used till their registration period. Also all vehicles acquired from now till March 2020 will be eligible for additional 15 percent depreciation. Furthermore, Sitharaman said that registration fee hike has now been postoponed to June 2020. She also said that in order to boost demand, the government shall lift ban on purchase of new vehicles in govt departments.

ALSO READ: Jobs more important than playing to galleries, says Rajiv Bajaj

Earlier, the FM compared India’s economy to the rest of the emerging economies and said that India was well placed compared to its peers. The FM elaborated that global situation looked bleak and that the global projected GDP growth was 3.2 percent and could be revised downwards.

ALSO READ: Chief Economic Advisor speaks out against fiscal stimulus

 ALSO READ: Arvind Panagariya echoes CEA’s views, says private sector has to shape up

The Finance Minister had earlier this month also held a range of consultative meetings with representatives from various sectors of the industry to address concerns of economic slowdown. The minster had said that she would talk about ways of tackling the slowdown across sectors after studying the feedback from the representatives.

Follow our complete coverage of measures announced by finance minister Nirmala Sitharaman here. 

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KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Economic relief: Government likely to take calibrated steps

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Slowdown talk is gathering momentum by the day and the Narendra Modi government is fighting hard to calm down frayed nerves. However, with the first quarter GDP expected to come in close to 5.5 percent, the government is walking a tight rope.

CNBC-TV18 has learnt that the government is looking at providing relief but in a calibrated manner and for certain specific sectors only.

READ ALSO:  Piyush Goyal weighs in on fiscal stimulus versus prudence 

The buzz in the corridors of North Block is that the government cannot be held responsible for socialising losses while the private sector guns for profits.

So while the government acknowledges the fact relief is needed in certain sectors, one should expect a big bang fiscal stimulus.

The government is mindful of the fact that borrowing costs should not escalate. Currently the 35 bps move on bond yields seems to have negated the recent repo rate cut by the Monetary Policy Committee.

READ ALSO: Government may need more funds to meet Finance Commission’s obligations to states

CNBC-TV18 has also learnt that for the auto sector, scrappage policy is a likely option as GST rate cut has not yet been formally discussed by the GST council.

The government is also hopeful that some recommendations of the Direct Tax Code could be taken up within this year and if implemented could have an initial impact of 60-70 bps on the GDP.

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Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Market will continue to drift unless there is stimulus from government, says Avendus Capital

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Andrew Holland, chief executive officer of Avendus Capital, on Thursday said that the Indian market will continue to drift unless there is stimulus from the government.

“There are a lot of research reports saying that if we take bottom 40 of the Nifty, it is an index level of 9000 or below, so there is lot value there but one is waiting to see what, if and when there is a package across industries which will help the market move,” he said in an interview with CNBC-TV18.

With regards to the auto space, he said the house is constructive on the auto sector. According to him, there are a lot of things the government can do like reduce insurance which was moved from one to five years.

He said India is not alone in talking about stimulus. “Donal Trump tweets about everything as a stimulus to keep his stock market higher and even Germany is talking about a huge one, so we are not alone in this because growth is slowing everywhere. So, why are we so worried about being fiscally prudent?” Holland asked.

When asked where they would look to put money into besides autos, he said, “We are just sticking to leaders in each of the sectors until one can see bit more light at the end of the long tunnel that we seem to be in.”

With the rupee on a downward trajectory, when asked if he would look at rupee sensitive plays like pharma and IT, he said, “I think the big call is when does the dollar weaken? That will be the time we will change what we think about the rupee and that is not far away, Trump anyway wants a weaker dollar, it is just not getting there at the moment.”

He said Sebi easing the FPI norms was a positive move but he “did not expect FPIs to rush in until we hear from the finance minister what will happen in terms of tax going forward.”

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3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Economy needs stimulus, credit demand muted, says SBI Chairman

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Amid the economy roiling through a slowdown in demand and consumption, State Bank of India (SBI) Chairman Rajnish Kumar on Sunday raised the pitch for a stimulus, saying that the credit demand remains subdued.

Though lack of credit demand exists in the economy, there is no supply-side constraint as the public sector banks are well-capitalised, he said.

“Demand for credit in the economy is subdued. There is a need for stimulus in the economy,” Rajnish Kumar told media here.

The SBI chief was in the city to attend the multi-level consultation programme with SBI branch managers in the region.

“There is no supply-side constraint. More or less, the public sector banks are well capitalised and bank rates also moderated,” he said while expressing hope that the monsoon will have a positive impact.

Increased spending by the government and the upcoming festival season would boost demand, Kumar pointed out.

Intensifying the efforts to find ways out of pressing issues of tax surcharge on the super rich, the slowdown in the auto and housing sector, the Finance Ministry and the Prime Minister’s Office (PMO) are constantly holding meetings to come out with solutions to tackle the near-stagnant economy. They are discussing options and solutions on tackling the slowdown in the auto, realty sectors and and also on the equity market, being battered by FPIs.

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Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow