InvestorQ : What is the outcome you see in terms of announcements after the meeting between FM and prime minister?
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What is the outcome you see in terms of announcements after the meeting between FM and prime minister?

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2 years ago
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During the week, finance minister had met the prime minister to discuss the measures to revive the economy and the markets. This has become important after ANZ Bank reported that Indian GDP may fall to as low as 6.2% in the fiscal year 2019-20. In the light of the meeting between Mr. Modi and Ms. Sitharaman, there has been a lot of optimism and enthusiasm built round the meeting between the PM and the finance minister.

What exactly can the economy and markets expect. At the macro level, there could be some major announcements on the spending front including rural spending. A greater infrastructure thrust is also possible at this point of time. However, the government has budget constraints at this point of time and hence may not be able to stretch the fiscal deficit too much beyond this point. That remains a limitation.

One area the announcements can be expected in the area of simplifying GST processes. GST was a great idea but its efficiencies are yet to be realized due to flaws in the way it is structured. Let us look at what the policymakers can really address on the GST front. To begin with, the registration process is too cumbersome. There is too much documentation process involved and it should be made a single window process. That is still keeping a lot of small businesses away. The answer is to offer a flat rate of GST up to a certain threshold and just link it to bank funding and all state incentives. Secondly, with too many slabs, the basic purpose of one nation, one tax is defeated. To begin, the government can give a boost by reducing the GST on autos from 28% to 18%. The mean rate can be kept at around 12% with reduced slabs. The higher compliance should more than compensate for the lower rates over a period of time.

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