New Delhi: India’s economy is expected to rebound in 2020 on the back of measures taken by the government and the Reserve Bank of India (RBI) coupled with easing of global trade tensions, industry body Confederation of Indian Industries (CII) said Sunday.
The chamber also suggested a flexible fiscal policy that will set a central government’s target for the deficit in the range of around 0.5 to 0.75 per cent, and said it is likely to have a significant multiplier effect on the economy.
The CII said that as 2020 starts, there are nascent signs that the economy is on a better footing than what it was in the year gone by. “With the proactive measures taken by the government and the RBI, industry believes that the slowdown will be overcome, and a gradual recovery will soon be in place,” the CBI said in a statement.
“Nascent signs of recovery are noted in the form of improved PMIs (Purchasing Managers’ Index) of manufacturing and services, jump in passenger air traffic, sharp moderation in the decline in sales of passenger cars, among others,” said CII president Vikram Kirloskar in the statement.
According to the CII, with the initial difficulties associated with the goods and services tax (GST) and the Insolvency and Bankruptcy Code (IBC) getting gradually ironed out, the industry is hopeful of substantial benefits for the economy.
It said that while 2019 will be remembered as one where the systemic clean-up of the financial sector picked up pace, which might have resulted in ‘short-term pain’, this tidying up will have extensive positive ramifications for the economy in the short-to-medium term.
CII said that with the sharp moderation in growth, the time has come to adopt an expansionary fiscal policy.
“Just like our medium-term inflation target range, we can have a flexible fiscal policy target which will set a central target for the fiscal deficit with a range of around 0.5 to 0.75 per cent. The additional availability of funds may be spent on key infrastructure projects which can be implemented quickly. This is likely to have a significant multiplier effect on the economy,” said president-designate Uday Kotak.
Besides, the chamber also suggested that in order to increase the tax base and ensure higher compliance, it is necessary to simplify and reduce the number of GST rates and increase its coverage.
PTI