Tags Posts tagged with "Fiscal"

Fiscal

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According to Mr. Jaitley, the government certainly has no reservations in privatising state-owned firms but it has to wait for the right time before divesting its stake in PSUs.

Finance Minister Arun Jaitley on Thursday, 21 September 2017, promised “appropriate actions to revive the slow economy and said that the government has seized at the problem of private investment not picking up. Though he acknowledged that there is a problem of private investment not picking up as quickly, as was promised.

Two years ago, India had a GDP growth outpacing a slowing China. But since the start of 2016, the growth has fallen, hitting a three-year low of 5.7 per cent in the April-June quarter. It resulted in India losing the fastest growing economy tag to China.

Besides falling GDP growth rate, the exports are also decreasing and the industrial growth is the lowest in five years. The current account deficit i.e. the difference between inflow and outflow of foreign exchange has risen to 2.4 % of GDP in April-June.

For current financial year, the government has raised ₹ 72,500 crore through stake sale in PSUs. According to Mr. Jaitley, the government certainly has no reservations in privatising state-owned firms but it has to wait for the right time before divesting its stake in PSUs.

Goods and Services Tax (GST) was implemented from July 1. Since then it has subsumed over a dozen taxes and efficiently transformed India into a single market with uniform tax rates.

Mr. Jaitley has said that the government has been able to contain the inflationary impact post GST. But as far as black money and benami transactions are concerned, according to him it is no more safe in India to deal in excessive cash.

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Ever-strengthening rupee is also a significant challenge to the domestic industry as cheaper imports flood the country.

It looks as if the growth rate will be below 7% this fiscal year which translates roughly to a loss of ₹1.5 lakh crore of national income. What it signifies is millions of jobs not created.

Ever-strengthening rupee is also a significant challenge to the domestic industry. Since January the rupee is 7% stronger compared to the American dollar. It is stronger than its Asian peer currencies too, including China, the Philippines, Indonesia and Thailand. This directly hurts our export prospects.

The strong rupee also hurts the domestic industry since cheaper imports flood the country. The GST regime has given an extra advantage to importer traders since the countervailing duty that they now pay as GST can be offset against other taxes.

Demonetisation has its adverse effects as well. Investment and consumption spending which were postponed due to cash shortage might recover but jobs that are lost are lost forever.

The agriculture sector GDP shows nominal GDP growth to be lower than real GDP, which will mean depression in farmers’ incomes.

Solution to these problems is a big pick-up in manufacturing and private investment spending. Structural reforms of GST, the new insolvency code, the new monetary framework and Aadhaar linkage might show better results in the medium to long term.