The new government is looking to get economic growth back on track by simplifying taxes, easing compliance and spurring demand. Issues like promoting private investment and stimulating demand has already been taken up as the new administration gets ready to present a full budget in July. There is concern that any delays will intensify the current slowdown, said some government officials.
“There is no time to be lost,” said one of the officials.
The finance ministry and other departments have already prepared measures aimed at stimulating the economy that need to be taken by the new government.
India’s economic growth is likely to have slowed to 6.5% in the fourth quarter of FY19 based on the annual forecast of 7% for the full year. A decline in car sales in recent months and a slowdown in the consumer goods sector suggests waning demand amid still-elusive private investment.
The first challenge would be to revive demand, said the officials. The budget is likely to be presented in early July and could, as was promised in the interim budget, cut personal taxes to put more money in the hands of the middle class, thus persuading people to spend more and drive up demand.
The draft of a new industrial policy is ready for rollout, said the officials.
Public Investment Push
It seeks to encourage the Make in India manufacturing initiative as well as the development of industrial infrastructure.
Other measures could include a big push to public investment in infrastructure as private sector investment may take time to kick in.
Some internal discussions have already taken place within the government on goods and services tax (GST) 2.0. This will include easing compliance, a review of the rate structure to simplify it and a plan to bring items such as petroleum under GST’s ambit. GST four slabs of 5%, 12%, 18% and 28% could be converged to two main rates.
Cement continues to be in the highest 28% bracket along with automobiles and rates on these items could be looked at with GST revenues stabilising. The measures also include giving an impetus to exports, which has been a laggard thus far.
Another official said the government will build upon what has been achieved so far. Measures for improvement in the ease of doing business and the startup framework have also been drawn up to make it easier for entrepreneurs to set up businesses.