FICCI Suggests Relaxation of Fiscal Deficit Target to Boost Demand
Infusion of Capital into the Economy is Imperative to Rev up Growth: Dr. Sangita Reddy, President FICCI
NEW DELHI: With advance GDP estimates projecting FY20 GDP growth at 5%, it is a necessity now for the government to look at measures to infuse capital in the economy in a systematic way.
Dr. Sangita Reddy, President, FICCI, said, “The GDP growth estimate for the current financial year of 5% is on expected lines. The growth during the first half of the year has been moderate, and we hope to see some momentum in the latter part. There are nascent signs that point towards improvement, and we need to make sure that these find a more solid footing going ahead”.
“FICCI is of the view that the fiscal deficit target could be relaxed to support the infusion of Rs 1.5-2 lakh crore in the economy in the coming year, as such fiscal expansion is much needed at the current juncture to give a boost to demand and trigger investments,” said Dr. Reddy.
“The nature of the economy is cyclical, and when a potential recessionary cycle is foreseen, move to induct more capital into the economy to re-energize, it is more important than worrying about the fiscal deficit. A time-bound plan must be put in place on the mechanics to repair fiscal deficit through different measures, including disinvestment in PSUs,” added Dr. Reddy.
“Union Budget 2020-21 is to be announced soon, and we look forward to the government continuing taking steps towards bridging the existing gaps and giving out positive signals to boost the sentiment, consumption, and investments. Apart from providing cheaper loans, more efforts must be made to increase incomes, especially in rural areas. This can be achieved through an increase in the quantum of income support under PM-KISAN and expansion of the Direct Benefit Transfer scheme. Steps are also required to boost construction, infrastructure, and exports,” said Dr. Reddy.
“FICCI is also of the view that a significant focus on the economies of the future technologies like artificial intelligence, along with added stress on science and innovation, is also critical to add a parallel wave of growth,” added Dr. Reddy.
FICCI President said that the government must enable reforms, which will enable ease of doing business, for sustaining growth and demand, and added that a survey is being conducted across the industry by the chamber to assess the sentiment of the nation and what it would take for corporate India to re-energize itself.
FICCI welcomes cabinet decisions to ease coal mining rules, VGF for North East Gas Grid and disinvestment in PSUs
FICCI has welcomed the decision of the cabinet, bringing in a major reform by promulgating Mineral Laws (Amendment) Ordinance 2020. The ordinance, which was approved by a committee headed by Prime Minister Narendra Modi, will ease rules for auctioning coal mines to open up to all sectors and will allow the auction of 46 iron ore and other mines before March 31, 2020.
“This decision will do away with the leeway provided to only steel, power and coal washeries and open the commercial coal mining bidding for all the firms. The Cabinet decision will also do away with end-use restrictions of the mining blocks and pave the way for the first leg commercial coal auctions within this fiscal,” said Dilip Chenoy, Secretary General, FICCI.
“The move is expected to provide a big push towards efforts for auctioning of coal blocks for commercial sale. It will help attract investments from Indian and global corporates. This is also a major step towards realizing the Government’s target to completely stop coal imports by power plants by 2024,” said Chenoy.
After Supreme Court cancelled 214 coal blocks in 2014, only 29 were auctioned due to end-user restrictions. The amendments will remove these restrictions and will also improve the ease of doing business in the country.
While Government recently announced 100% Foreign Direct Investments under the automatic route for coal and lignite mining for captive consumption by power projects as well as iron and steel and cement units, the move to allow auctioning of mines to all sectors will probably help in clearing all the hurdles ahead of the upcoming auctions of commercial coal blocks.
FICCI also welcomes the Union Cabinet’s approval of the proposal to provide viability gap funding to build a gas grid in North East India at a cost of Rs 9,265 crore. “Its a welcome move and good for increasing the share of gas in the energy mix,” said Y K Modi, Past President, FICCI and Executive Chairman, GEECL.
The Union Cabinet’s approval for in-principle strategic disinvestment of equity shareholding in five PSUs — Minerals and Metals Trading Corporation Ltd (MMTC), National Mineral Development Corp (NMDC), MECON, Neelachal Ispat Nigam Ltd (NINL), and Bharat Heavy Electricals Ltd (BHEL) is also a step in the right direction. “This will help generate resources for supporting investment and revive growth,” said Chenoy.
