After revoking Article 370 granting special status to Jammu and Kashmir in a seamless manner and the security dragnet in the erstwhile state not resulting in a single bullet being fired, Prime Minister Narendra Modi has begun to focus on the beleaguered economy haemorrhaging in an ugly manner.
In his meeting with Finance Minister Nirmala Sitharaman and her team, Modi has argued for quick alleviation measures. With the FPI surcharge causing cataclysmic corrections in the capital markets, the BSE Sensex has seen a drop of 8 per cent since early June, accentuated after the Budget speech which imposed the tax, and the Prime Minister is reportedly concerned about disinvestment receipts which are contingent on a stable equity market.
While the Parliament has passed the Finance Bill and tweaking it now will have to see an extraordinary measure, the Finance Ministry has reportedly sought the Law Ministry’s view on how to overhaul it. Section 119 of the IT Act which allows grandfathering is one option. Bringing an ordinance is another, but the former is a far better option.
Sector-specific sops could be on the anvil as early as this weekend; the auto and realty sectors are in shambles, consumption patterns after a 10-year glut have fallen off the cliff, savings rate is at a multi-year low and overall slowdown fears are rampant with almost all metrics in the negative or having seen huge deceleration.
The January-March quarter GDP has slowed down to 5.8 per cent, the lowest in five years, which has caused pain points to emerge all across the economic vector.
While the Finance Ministry mandarins did make a presentation on these pain points, the Prime Minister is clear that he wants the economy to be kick-started. The revival package though doesn’t have much room to manoeuvre given the needle on the fiscal deficit and the lack of readily available resources. However, a broad sweep of what can be expected will be on the following lines:
* The Prime Minister agrees that there is a strong need for the growth revival and the government will go to any extend to jumpstart the somnolent economy.
* The government strongly believes that a vibrant capital market is a must to achieve its divestment target.
* The proposed surcharge on the FPIs to be reversed through tweaking as it has done incalculable damage.
* Long-term capital gain tax to be enhanced to 3 years.
* Slowdown in the auto sector is serious, resulting in job losses for which the government is concerned. GST rate could be slashed to 18 per cent across all auto segments. Further, lower registration and road tax levies may provide additional cushion as the festival season kicks in.
* A one-time stimulus package for real estate developers is on the anvil since both auto and realty sectors are job providers.