One more booster shot for economy this week

The government is likely to come out with the fourth set of booster shots this week to arrest the slowdown in the economy.

A senior government official said work on the new package is in progress, but did not share details, except that the measure could be announced before Saturday. Expectations are that the new package will focus on increasing liquidity and promoting investments.

Since August 23, three booster packages have been announced. The first focussed on the automobile sector and a further easing of the business environment, including a rollback of the surcharge on tax on foreign portfolio investors. The second one related to amalgamation of 10 banks and a ₹50,000-crore recapitalisation package, while the third was oriented to help the housing and export sector.

The Finance Ministry held meeting with various sectors and, based on their demands, designed the measures.

This week, there are two crucial meetings, both to be presided over by Finance Minister Nirmala Sitharaman. The first one, on September 19 with bank chiefs, will focus on banks’ contribution in implementing various measures such as the transmission of policy rate cuts through various instruments, and priority sector tags for export credit.

And on September 20, Sithraman will chair the 37th meeting of GST Council, which is expected to discuss rate revisions for various sectors, including automobiles and hotels.

All these measures are being taken at a time when the economy is slowing down. GDP growth rate for the first three months of the current fiscal slowed to 5 per cent, the lowest in six years. There is expectation of a fiscal stimulus, but the tight fiscal situation has restricted the government so far on that front.

Fiscal discipline

The government is also looking to bring about more fiscal discipline by curbing off-Budget borrowings by various government bodies and public sector enterprises. Such borrowings are not taken into consideration for calculating the fiscal deficit as announced in the Budget. Economists feel that they distort the actual fiscal deficit.

A senior government official, expressing concern about higher borrowings by the State governments, noted that even after higher devolution (42 per cent) by 14th Finance Commission and the budget, States are borrowing heavily, pushing up theoverall deficit (Centre plus States combined).

The official indicated that before preparations begin for the next Budget (for fiscal year 2020-21), measures could be initiated to clean up the system.

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