Goa: Finance Minister Nirmala Sitharaman will announce more measures to support economic growth and job creation on Friday in continuation of the steps announced in recent weeks as she tries to steer Asia’s third largest economy into a faster growth trajectory.
Sitharaman will address the media on Friday morning ahead of the 37th meeting of federal indirect tax body, the Goods and Services Tax (GST) Council, scheduled here. A government official said on condition of anonymity that there could be measures for supporting small and medium enterprises.
Sitharaman on Thursday said banks have been told that no stressed-asset MSME should be declared a non-performing asset (NPA) till March 31 next year.
Sitharaman, who reviewed the performance of banks with the top management of public sector banks, told reporters the banks have been requested to sit with the stressed-asset MSMEs (Micro, Small and Medium Enterprises) and work with them to get them out of the situation.
She also reviewed credit growth and transmission of RBI’s rate cuts through banks’ lending rates. She also urged bankers to promote lending.
Sitharaman had last Saturday announced a host of steps to support two struggling sectors of the economy—housing and exports. The measures included easing of foreign borrowing norms to facilitate low cost funds for affordable home buyers, a ₹20,000 crore corpus for last mile funding of healthy housing projects, an overhaul of the tax refund schemes for exporters and priority sector tag for export credit, which will improve exporters’ access to credit.
Indian businesses have been battling a demand slowdown and a liquidity crunch which has resulted in economic growth rate cooling down to a six year low of 5% in the June quarter. The Reserve Bank of India has been trying to improve liquidity in the system and lower the cost of funds through a series of steps including reduction in the benchmark interest rate four times since January, bringing the repo rate to 5.4% in August.
So far, the government has announced measures to improve access to credit for small businesses and to enhance the liquidity of non-bank lenders and housing financiers. It has also announced its resolve to front-load public spending and to invest ₹100 trillion in infrastructure over the next few years to stimulate the economy.
Analysts believe the slowdown in consumption also has to do with income levels. “Demand for funds primarily by households for investment or purchase of consumer durables is dependent not only on the cost of borrowing but also on income levels. It would therefore be far more effective if the monetary initiative is complemented by a corresponding fiscal initiative," said consultancy firm EY said in a recent note on the economy.