India: Package soon to boost economy but no cuts in fuel rates: Jaitley – 21 Sep 2017

  • Finance minister Arun Jaitley said steps to lift the slowing economy will be taken after these are endorsed by Prime Minister Narendra Modi. He declined to provide details, saying the measures would be unveiled only after consultation with the prime minister.
  • The 2Q17 figures prompted economists to pare estimates for the FY17. Experts have called for measures to stimulate the economy after GDP growth slumped to a three-year low of 5.7%.
  • While disruptions due to the rollout of the goods and services tax (GST) on 1 Jul 17 and the lingering impact of demonetisation are seen as the main reasons for the economic dislocation, some experts said the decline had set in since 2016 and is more structural in nature. GDP growth has slowed from 7.9% in 2Q16 to 7.5%, 7% and 6.1% in subsequent quarters on the way to 5.7% in 2Q17.
  • Jaitley said inflation was still within the statutorily fixed monetary policy target of 4% (with a 2% window on either side). Retail inflation hit a five-month high of 3.36% in Aug 17.
  • With regard to high fuel prices amid low global crude rates, Jaitley said the government needs revenue to support public spending without which growth will suffer. Those political parties seeking a cut in taxes on fuel should first ask their state governments to do so.
  • The Reserve Bank of India is set to make its next monetary policy announcement on 4 Oct 17 amid calls for a cut in interest rates to help stimulate growth.

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