India Inc seeks better transmission of policy rate cuts by banks

Our Bureau New Delhi | Updated on August 08, 2019 Published on August 08, 2019

Finance Minister holds meeting with industry chambers; GST cut in cement, consumer durables urged

India Inc has sought better transmission of the policy rate cuts by banks and lowering of Goods and Services Tax (GST) on cement and consumer durables beside other measures to kick-start investment and consumption demand in the economy.

Finance Minister Niramala Sitaharaman met with industry representatives as part of a series of meetings to discuss the current economic situation and to get inputs for an action plan to boost the economy.

There is an apprehension that GDP growth rate could dip further in the first quarter (April-June) of the current fiscal from 5.8 per cent recorded in the January-March quarter. The latest growth number will be announced at the end of this month.

According to sources, in a meeting that lasted almost for three hours, the Finance Minister sought inputs from the corporate honchos to stimulate the economy.

TV Narendran, Vice-President of CII, said the cut in banks’ lending rates have not been commensurate with that of the reduction in policy rate by the Monetary Policy Committee.

“This weak and asymmetric monetary transmission process has constrained the economic recovery process by impeding the fall in lending rates which could stoke consumption demand,” he said.

In order to lower the cost of capital, Narendran said that government needs to look at the small savings rates and reduce them in line with the market rates. If that does not happen, then the ability of banks to reduce deposit rates and hence ease the lending rates will be at best limited.

BK Goenka, President of Assocham, sought a ‘quick-fix’ stimulus package to initiate investment cycle and an immediate game plan to make the best out of the ongoing US-China trade war.

In his presentation, he said, “With the current slowdown in global and domestic markets, we need to have quick-fix solutions and observe the economy for a few years for the effectiveness of the stimulus package.”

Emphasising the immediate need to revive exports, he said sectors such as textile and garments, are suffering due to constant review and frequent changes in tax refunds/incentives schemes.

He said an investment of ₹1 crore in the garments/made up sector can create 72 new jobs. The investment-employment ratio in the textile sector is among the highest. “'Our export potential in the textile industry is further encouraged by rising costs in China, but the advantage is being taken by Vietnam, Bangladesh and Mexico. We must emerge as a strong competitor,” he said.

Other industry representatives urged for lowering of GST on cement, consumer durables, automobiles including parts to 18 per cent from 28 per cent.

There were also complaints about the higher rate of corporate taxes. Reviving private sector capex is need of the hour. One of the growth drivers would be investment allowance and accelerated depreciation in greenfield projects.

There should be incorporation of accelerated depreciation system in first year or over three years. Tax rebates can be given for profits ploughed back as investment in new projects, said the industry representatives.

Published on August 08, 2019
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