Breaking News

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


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

CPI inflation hits 6-month high of 2.92% in April

India's retail inflation based on Consumer Price Index (CPI) continued northward journey for third straight month and inched up to a 6-month high of 2.92% in April 2019 due to a spike in food prices, including......

Indian economy to grow at 7% range in current fiscal: Subramanian

Chief Economic Advisor (CEA) Krishnamurthy V. Subramanian has said  that the Indian economy would grow at 7% range in the current financial year (FY20) powered by the effects of the strong structural......

Banks take 57% haircut in 94 cases resolved in FY19: ASSOCHAM-CRISIL study

A joint study carried out by the industry body Associated Chambers of Commerce & Industry of India (ASSOCHAM) and rating agency CRISIL stated that banks have taken a huge 57% haircut in the 94......

Top News

View all news

SRF, NIIT Technologies and United Bank of India to see some action today

SRF has entered into a definitive agreement to sell its Engineering Plastics Business to DSM, the Life Sciences and Materials Sciences Company in an all-cash transaction, amounting to Rs 320 crore. The......

NIIT Technologies concludes sale of 88.99% stake in ESRI India Technologies

NIIT Technologies has concluded the sale of 88.99% equity shares in ESRI India Technologies, India to Environment Systems Research Institute Inc., USA. Consequent to above sale, ESRI India Technologies,......

United Bank of India to raise Rs 1,500 crore by various means

United Bank of India has received approval to raise equity capital not exceeding Rs 1,500 crore in one or more tranches during the financial year by way of Qualified Institutions Placement, Public Issue,......