PM reviews economy with Sitharaman, officials

New Delhi, Aug 15 (IANS) Prime Minister Narendra Modi on Thursday reviewed the state of economy and the likely steps to arrest the current slowdown with Finance Minister Nirmala Sitharaman and senior bureaucrats, sources said.

The Prime Minister also reviewed various proposals that might be used to shore up stalling growth, the sources added.

The finalised stimulus package, which might include new policy framework and tax cuts, are likely to be announced in about two-weeks' time, sources said.

Various sectors are facing a sales downturn and truncated growth due to combination of factors such as high GST rates, natural calamities, stagnant wages and low job creation.

IANS had earlier reported that the slowdown-hit economy may soon get a booster dose from the government with Finance Ministry working on a stimulus package for the industry which may include a slew of financial measures ranging from tax cuts, subsidies and other incentives.

Specifically, sources said the package would not only aim to reduce the cost for the industry but would also lay out procedures that would further provide impetus to ease of doing business.

This could also include measures by the revenue department to ensure honest taxpayers are not harassed and those who commit minor or procedural violations are not subjected to excessive action.

Besides, the measures would try to address the issues of raising consumption by providing more money to the consumers and reducing the prices of consumables by reducing indirect tax rates of a host of items.

Already, a separate package is being looked at for the auto sector whose representatives met Finance Minister Nirmala Sitharaman last week. The industry has sought lower GST rates on automobiles and introduction of a scrappage policy that incentivises new purchase. This is expected to beat the slowdown that has resulted in passenger car sales plunging 35.95 per cent in July.

The collapse of some large NBFCs has been cited as a major factor for the sales downturn as these companies used to provide the bulk of automobile financing.

The Government will, however, have to weigh the size of the stimulus package given less than encouraging revenue position and a fiscal deficit that has risen to 3.4 per cent in FY19 due to expansionary policies of the previous governments. It has also been kept at a high of 3.3 per cent of GDP in FY19-20 as well, meaning this number would again have to be breached to offer a stimulus.

The stimulus is also likely to cover financial markets that have shown big volatility in recent weeks, particularly after the presentation of the Budget on July 5 that raised tax surcharge on FPIs.

While Finance Ministry officials do not indicate what changes could be made, sources said the matter has been discussed internally and certain changes in taxation on share markets could be announced.