Breaking News

You are here » Indian-Commodity  :  Economy  :  Tax relief for middle-class, direct cash transfer to farmers to support growth: Moody's

07-Feb2019

Tax relief for middle-class, direct cash transfer to farmers to support growth: Moody's

Expressing hopes on India's growth, global credit ratings agency, Moody's Investors Service has said that the tax relief steps for the middle-class and direct cash transfer programme for farmers will give a fiscal stimulus of about 0.45% of Gross Domestic Product (GDP), and support growth through increased consumption over the near term, albeit at a fiscal cost. Monitoring 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. It said while the middle-class tax relief will weigh somewhat on direct tax revenues, GST collections will continue to pose risks to indirect tax collections if they fall short of budgeted expectations.

The rating agency also said that based on the government's nominal GDP growth assumption of 11.5%, this implies a tax buoyancy of about 1.08, which they consider to be achievable. However, similar to last year, there are risks to the downside in 2019-20. besides, it said 'Recent adjustments to the Goods and Services Tax (GST) framework will make collections more challenging ... The changes will further shrink the tax base, constraining potential future increases in tax revenue, because SMEs represent the vast majority of businesses in India'.

Moody's further said ongoing fiscal slippage from spending and tax cut proposals ahead of election is credit negative for the sovereign. It said the ongoing fiscal slippage from the budgeted targets over the past two years, and their expectation that the government will face challenges meeting its target again in fiscal 2019, does not bode well for medium-term fiscal consolidation. However, it 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.


Related News

View all news

Govt approves new national electronic policy 2019

With an aim to increase electronic manufacturing ecosystem in country, the government has approved a new National Electronic Policy 2019.  The objective of new electronics policy is to create......

Cabinet approves promulgation of amendments in Companies Ordinance 2019

In order to incentivize compliance with law and to extend greater Ease of Doing Business, the Union Cabinet has given green signal to the promulgating an ordinance for companies law amendments. A bill......

RBI to infuse Rs 12,500 crore into system through OMOs to increase liquidity

In order to increase liquidity into the market, the Reserve Bank of India (RBI) said it would inject Rs 12,500 crore into the system through purchase of government securities on February 21, 2019. The......

Top News

View all news

Tata Motors signs LTS agreement with its employees

Tata Motors has signed a long-term wage settlement (LTS) agreement with its employees. Under the agreement, workmen will get a wage rise of Rs 9,000 per month along with other incentives based on performance.......

Canara Bank invites bids from merchant bankers to manage its $350-500 million MTN issue: Report

Canara Bank has reportedly invited bids from merchant bankers to manage its $350-500 million issue of senior unsecured/tier-II capital bonds under its medium-term note (MTN) programme. The issue size may......

Alembic Pharma gets USFDA's nod for Acetazolamide Extended-Release Capsules

Alembic Pharmaceuticals (Alembic) has received approval from the US Food & Drug Administration (USFDA) for its Abbreviated New Drug Application (ANDA) Acetazolamide Extended-Release Capsules, 500......