he Centre neither has the leeway to cut taxes nor it has space to hike Goods and Services Tax (GST) rates to increase revenue, according to Prime Minister's Economic Advisory Council (PM-EAC) Chairman Bibek Debroy.

Speaking to BusinessToday.in, Debroy also said big bang announcements in the upcoming Union Budget 2020 may not become a reality.

He said it is "unrealistic" to expect any big bang announcements in the upcoming budget as the Centre has almost exhausted its fiscal space and going forward with any further measures to boost economy could backfire.

On the finance ministry's recent measures to arrest slowdown, Debroy said the results may take up to two years to show.

"Any policy change, an instrument, leads to a results with a time lag of anything between 18 months to two years," Debroy said.

Finance Minister Nirmala Sitharaman has announced a slew of measures including bank consolidations, corporate tax cut, a stress fund to revive real estate projects and much more.

However, none of the aforementioned measures have helped in reviving the economy as yet.

Meanwhile, India's GDP growth has hit a new low of 4.5 per cent in the June-September quarter and is the longest spell of slowdown in two decades. Growth is further expected to fall in the remaining quarters of 2019-20.

But Debroy said that quarterly figures are "somewhat unreliable" and are not as firm as estimates available at the end of the year.

"Therefore, we should not get too swayed by the quarterly figures especially because they also depend on what happened exactly that same point one year ago in the same quarter," he said.

While Debroy said the economy will grow at five per cent in 2019-20, he assured that GDP will touch six per cent in the next fiscal.

OPTIONS LIMITED

Commenting on the government's effort to boost demand and revive investment, the economist said that India "must resist sectoral concessions" as they cause distortions.

Debroy said economists, including him, are "prone" to giving easy solutions with thinking about the consequences.

He also said that government has limited options in terms of reviving demand. He said Finance Minister Nirmala Sitharaman announced whatever was budgeted in terms of government expenditure and there is nothing left to do but wait and watch for these measures to show results.

Debroy further said that at least 62 per cent of public expenditure happens at the level of states and that it is completely unreasonable to expect Union government to speed up public expenditure at state levels.

However, several news reports have indicated that the Centre has been struggling to pay GST compensation cess to states for a few months.

On Monday, the Centre released Rs 35,298 crore to make up for the loss of compensation revenue. However, there is still confusion over the period for which the compensation was released.

Debroy further suggested that increasing consumption through full transmission of Reserve Bank of India (RBI) rate cuts is difficult as banks in India are stressed.

Published On : 18-12-2019

Source : India Today