Govt considering $7.7 billion stimulus spending to boost economy: report

Prime Minister Narendra Modi led government is reportedly considering a plan to loosen the fiscal deficit target so that it could spend an additional Rs 500 billion in the financial year ending in March 2018, Reuters reported citing the two government sources. 

On Wednesday, Finance Minister Arun Jaitley said the government was looking for ways to lift economic growth, which slipped to a three-year low of 5.7% in the quarter to end-June.

The idea of a stimulus package, the contours of which are still not clear, came about after a review meeting on Tuesday, which was attended by a few ministers and top government functionaries – including Commerce Minister Suresh Prabhu and Railway Minister Piyush Goyal. Jaitley said they will also meet other departments over the next few days, and finalise the package with the blessing of Prime Minister Narendra Modi.

While fixing the growth engine, FM clarified his government was not in favour of lowering taxes on petrol and diesel prices. The government needs revenue to support public spending without which growth will suffer. Former PM Manmohan Singh recently stated that the Indian economy was running on “just one engine of public spending”.

The move to dish out a stimulus package comes at a time when the GDP growth hit a three-year low of 5.7% in the first quarter. Retail inflation hit a five-month high of 3.36% in August. The current account deficit rose to 2.4% of GDP in April-June. The government has to think out-of-the-box and find solutions to turn around the economy and create more jobs in the country.