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Finance minister Nirmala Sitharaman. (PTI)
Finance minister Nirmala Sitharaman. (PTI)

Govt to front-load spending to aid growth: FM

  • FM’s silence over a fiscal stimulus implies that an increase in public spending may not be on the govt’s agenda
  • Spending the entire allocated amounts for various projects early in the fiscal year rather than waiting for the last quarter has been a strategy the govt has been employing whenever it wanted to support growth

NEW DELHI : The government will front-load capital spending this fiscal year in a bid to support economic growth, finance minister Nirmala Sitharaman said. Speaking to reporters in Guwahati, the minister said the government will come up with more measures to arrest the economic downturn.

Front-loading, or spending the entire allocated amounts for various projects early in the financial year rather than waiting for the last quarter, is typically done to support growth.

However, Sitharaman’s continued silence over a fiscal stimulus implies that big tax cuts or an increase in public spending to counter slowing growth may not be on the government’s agenda. India had slashed central excise duty by 4 percentage points across the board in 2008-09 in response to the economic slowdown that followed the global financial crisis. Due to fiscal constraints, it may not be easy for the government to offer that kind of tax cuts now. Federal indirect tax body, the Goods and Services Tax (GST) Council is scheduled to meet next month but the agenda will be decided closer to the date.

“We shall be spending considerable amounts for infrastructure building. And for that, post the budgetary announcement, I went to the extent of saying some of the milestones in public expenditure in infrastructure can even be brought forward," Sitharaman said.

She also indicated that more steps will be announced to boost growth. “Last week, I said I will come back with two more such announcements sooner. That is a continuous process. Interactions with industry stakeholders are continuing. We shall be a responsive government (and) we shall come back with measures that are asked (for) by the various groups," the minister said.

Sitharaman had last week reversed a tax increase on foreign portfolio investors, and announced steps to boost the automobile sector and deepen the bond market. She also promised to infuse 70,000 crore into state-run banks to improve balance sheets and help finance new projects. “We recognized that consumption had to be given a boost. We shall be spending considerable amounts for infrastructure building." She also said the government was committed to giving timely GST refunds to businesses.

As per official data, growth in industrial output decelerated to a four-month low of 2% in June 2019 from a revised 4.6% in May, indicating a demand slowdown. Merchandise exports contracted by 0.37% in the April-July period to $107.41 billion from a year earlier.

The Reserve Bank of India cut the repo rate by 35 basis points in its August 2019 monetary policy review, the fourth successive reduction in the repo rate so far this year to help revive growth. The ruling National Democratic Alliance government is committed to show it is decisive in dealing with economic headwinds amid worries of a global slowdown and criticism from the opposition on the government’s management of the economy.

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