The new government under Modi will hit the ground running as it looks to get economic growth back on track by simplifying taxes, easing compliance and spurring demand. A plan to kickstart private investment and stimulate demand has already been drawn up as the incoming administration gets ready to present a full budget in July. Government officials said there is a concern that any delays will intensify the current slowdown.
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.
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.