Income tax return relief, cash for farmers to boost growth in India: Moody's
Moody's Investors Service said on Tuesday that the income tax return relief and direct cash transfer programme for farmers will give a fiscal stimulus of about 0.45 per cent of GDP, and support growth through increased consumption, though at a fiscal cost. Observing that fiscal slippage from the budgeted targets for the past two consecutive years is "credit negative" for India, Moody's said the government will face challenges of meeting its target again next year and this does not bode well for medium-term fiscal consolidation.
The government has budgeted for total expenditure growth of 13.3 per cent annually in 2019-20 from 14.7 per cent in the current fiscal, resulting in an increase in total spending to about 13.25 per cent of GDP from 13 per cent of GDP this fiscal. The government has budgeted for gross tax revenue growth of 12.4 per cent annually in 2019-20 from 17.2 per cent this fiscal. Image source: Pixabay
In January 2019, the GST Council doubled the income tax exemption limit for companies to Rs 40 lakh in annual revenue, and adjusted turnover limits under the concessionary GST composition scheme. These changes will take effect in April 2019 and follow several cuts to GST rates since its implementation in July 2017. Image source: Reuters
Moody's, however, said that lack of a formal capital support plan for public sector banks is credit negative. The budget does not include any provisions for capital support for public sector banks (PSBs). Meanwhile, the budget also does not address last year's announced merger of three public sector non-life insurers, which creates ambiguity around their merger plan, the US-based rating agency said. Image source: Reuters