With no major fiscal support, govt's growth measures seen falling short

Current Affairs

India’s steps to boost financial market sentiment and support businesses could fall short of shoring up growth in Asia’s third-largest economy.
Finance Minister Nirmala Sitharaman announced a number of measures on Friday to help re-ignite an economy that’s slowed sharply on the back of weak consumption and a deteriorating global environment. However, she didn’t outline any major fiscal support -- as businesses had been calling for -- focusing instead on steps to spur foreign funds and lending.
Economists, finance leaders, industry executives and local media raised questions about the effectiveness of the measures, which included scrapping a tax on foreign funds, allowing concessions on vehicle purchases and hastening infusion of an already announced 700 billion rupees ($9.8 billion) of capital in state-run banks.
“These are short-term palliatives,” said Priyanka Kishore, head of India and Southeast Asia economics at Oxford Economics in Singapore. “What India needs is structural reforms to take growth to above 7 per cent.”
Consumers have cut spending in India as they turn more pessimistic about jobs amid a slowdown in growth to a five-year low.
Data due this week is likely to show the economy expanded 5.7 per cent in the quarter ended June, below the 5.8 per cent pace seen in the previous three months.
The withdrawal of the additional tax on foreign portfolio investors may help to spur sentiment in the equity markets. Overseas investors pulled out more than $3 billion from the nation’s stock and bond markets since July.

 But businesses had been hoping for more...Read More