Further responding to the concerns raised on the slowdown in the economy, the Finance Minister Nirmala Sitharaman has announced another round of measures to boost the economy.
She had already announced a series of measures in August 2019, the details of which you can read in an earlier article Modi Government’s Booster Dose to the Economy.
As promised back then, she made another intervention today (September 14), where the minister began by highlighting the positive developments in the economy and reporting about the implementation of various measures she had announced earlier. A slew of measures further announced to give a boost to exports and housing sector.
Here are some of the important graphs shown in the presentation highlighting the macroeconomic fundamentals.
The above graph suggests that Consumer Price Inflation has remained under control and continuously falling. Importantly, core inflation, which excludes food and fuel, has come down too.
Index of Industrial Production (IIP) has shown a positive trend and started reviving from the last quarter of the 2018-19. Out of the 8 core industries, steel sector has been consistently showing growth except for month of July 2019 where a dip in growth has been noted. Even the cement industry has, by and large, sustained itself before reporting a fall from the first quarter of 2019-20. Overall, the eight-core industries (having a weight of about 40% in the total IIP), denoted by blue line in the above graph, can be seen maintaining a constant before noticing a dip in July 2019.
The annual fixed investment rate as a percentage of GDP has been 28.2, 28.6 and 29.3 in years 2016-17, 2017-18 and 2018-19 respectively. It is showing signs of the revival of fixed capital in the economy.
India has yet again reached another milestone as far FDI inflow is concerned. In the year 2018-19, the gross FDI inflows reached $ 62 billion, highest ever in India. Moreover, the growth in gross FDI inflow in the first quarter of 2019-20 is greater by about $ 6 bn over the corresponding period of 2018-19. The inflow of FDI into India suggest the strong economic fundamentals of the country.
Both fiscal deficit and current account deficit have been declining except that current account deficit has slightly grown after the year 2016-17, but even then, it is in the controlled territory.
Follow up on Previous Announcements
It is to be noted that the finance minister had already announced two sets of reforms, in August 2019, to enhance economic growth. Following up on those announcements, minister talked about what steps are being taken to further facilitate those reforms.
A partial credit guarantee scheme for banks to buy assets of NBFCs has been implemented. Minister informed that some NBFCs have reportedly benefitted from the scheme. Measures are being taken to improve credit outflows from banks and transmission of interest rate cuts are being effected by banks.
Minister said an E-assessment scheme under section 143(3A) of the Income Tax act has been notified. This scheme will help in ending the existing human interface in the assessment procedure. Specific functional units on the basis of automated allocation system will handle the assessment and will be anonymous. No personal appearance of the assessee will be required and all communication will be made in electronic mode exclusively.
The minister’s speech has also included the document identification number (DIN). She said that all documents to have a unique DIN and documents without DIN will be treated as non-existing. She further mentioned that all notices, summons, and orders are to be issued only through systems. The validation of documents issued can be done on e-filing portal.
Measures to Boost Exports
Finance Minister Nirmala Sitharaman has focussed on measures to boost exports in the press conference. She talked about both the steps taken so far and new measures to be undertaken in the future.
Here are the new measures.
Measures to Give Push to Housing Sector
Finance Minister in her press conference described steps taken so far to give a push to housing sector.
She also outlined the future roadmap for a thriving housing sector in the country.
Therefore, as mentioned by the FM, positives signs have already emerged in the area of industrial production, annual fixed interest rates, etc. The newly announced measures are expected to further strengthen the economy. Importantly, the government has proved that it is consistently monitoring the economy and ready to address every concern arising from time to time.
Disclaimer – The graphs and tables are sourced from PIB India.