Stimulus measures for auto, housing sectors likely: Will frontload infra spending to bolster economy, says FM

CHENNAI: The government will frontload infrastructure spending in a bid to give the economy a boost and announce one or two more sets of stimulus measures aimed at reviving growth in the coming quarters, said finance minister Nirmala Sitharaman.
“Today the economy needs money... There should be consumption increase because of government spending money, and that can be best spent through spending on infrastructure,” she said in Chennai, marking the first 100 days of the Narendra Modi government in its second term of office.

The government has announced a plan to spend Rs 100 lakh crore on infrastructure in the next five years.

“I have appointed a task force which shall very speedily identify projects through which this money can be frontloaded and not wait for some other time,” she said. “We are in the process of identifying projects with which we can speedily get this money pushed down.”

India’s growth fell to a 25-quarter low of 5% in the April-June period.

The government has announced a series of measures in the past few weeks aimed at reviving the economy. Growth can be cyclical in nature, finance minister Sitharaman said.

‘Not Underestimating Growth Pangs’
“It is useful for us to remember such dips and rise in GDP growth do happen. I am not underestimating it and we are not sitting without responding to do something to boost it, to grow better,” she said. “Our attempts now and full focus now are to see how it can rise in the next quarter.”

She pledged more measures to stimulate the economy. “This is a government which is listening and wants to do something,” the finance minister said.

With regard to the industry demand for a cut in the goods and services tax (GST) on automobiles, she said the GST Council would decide on the matter.

“It is something, which if taken to the council, they will have to take a call,” she said, adding that the government was working on a few initiatives in this connection, including for the automobile and its components sectors.

“We are conscious that we have to respond,” she said, adding that a confluence of factors was impacting automobile sales such as the transition to Bharat Stage VI emission norms. Besides this, younger people prefer cab aggregators such as Uber or Ola or use the metro rather than buying their own vehicles.

The Reserve Bank of India (RBI) had also recently flagged disruptions in auto sector. “In addition, we use disaggregated data on vehicle registrations and provide evidence that exogenous policy changes such as vehicle insurance and the maturing of the ridehailing services segment have generated short-term fluctuations in automobile sales,” it had said.

The GST Council is set to meet on September 20 in Goa. The auto industry wants GST on cars to be cut to 18% from 28% to reverse a sales slump.

Sitharaman said the government was working a package for the housing sector and would be announcing it “sooner rather than later”.

As for GST revenue, which came in below Rs 1 lakh crore in August, the finance minister said the matter needed attention and that there was a need to widen the basket.

As for the bank consolidation plan announced recently, she said the boards of the lenders will decide the next move on this.