IMF hopes India will be able to regain growth momentum following economic slowdown
As Nirmala Sitharaman is fine-tuning the Union Budget for the coming financial year amidst constraints for presentation in Parliament on February 1, IMF chief Kristalina Georgieva has observed that growth slowdown in India appears to be temporary and that she expects the momentum to improve going ahead. The world appears a better place in January 2020 compared to what it was when IMF announced its World Economic Outlook in October 2019, she said at the World Economic Forum (WEF) 2020 at Davos in Switzerland. The factors driving this positive momentum include receding trade tension after the US-China first phase trade deal and synchronised tax cuts, among others. She, however, said 3.3 per cent is not a fantastic growth rate for the world economy.“It is still sluggish growth. We want fiscal policies to be more aggressive and we want structural reforms and more dynamism,” the Managing Director of the International Monetary Fund (IMF) said. On Monday, the fund lowered growth estimate for the world economy to 2.9 per cent for 2019, citing “negative surprises” in few emerging market economies, especially India. The IMF also revised downwards its forecast for India to 4.8 per cent for 2019-20.Regarding emerging markets, Georgieva on Friday said they are also moving forward.”We had a downgrade in one large market India but we believe that’s temporary. We expect momentum to improve further going ahead. There are also some bright spots like Indonesia and Vietnam,” she noted. According to Georgieva, a number of African countries are doing very well, but some other nations like Mexico are not. The IMF chief listed factors like weakness in long-term productivity growth and low inflation facing global economic.”We are living in a more risk-prone world. It is only January and there have been events that are sparking risks for the global economy,” she said. Updating World Economic Outlook the Washington D C headquartered IMF, said global growth, estimated at 2.9 per cent in 2019, is projected to increase to 3.3 per cent in 2020 and inch up further to 3.4 per cent in 2021.Compared to the October WEO forecast, the estimate for 2019 and the projection for 2020 represent 0.1 percentage point reductions for each year while that for 2021 is 0.2 percentage point lower.”A more subdued growth forecast for India… accounts for the lion’s share of the downward revisions,” it said. Meanwhile, as livemint says lowering of corporate tax rate has triggered hopes that Finance Minister Nirmala Sitharaman will announce some relief on the personal income tax front in coming budget From rejig of income tax slabs or rates to higher deduction, expectations are high though tax rate cuts will definitely hit revenues at a time when government’s finances are strained. Apart from some rationalisation in income tax rates, experts also expect the government to tweak dividend distribution tax and long term capital gains tax on listed securities.1) According to the current tax slab, income up to Rs. 5,00,000 is taxed at 5% and from ₹5 lakh to ₹10 lakh at the rate of 20%. Some rationalization should be carried out in the Budget 2020 to moderate rate of tax, says Saraswathi Kasturirangan, partner with Deloitte India.2) Ashok Shah, partner at NA Shah Associates LLP, expects some tweak in dividend distribution tax (DDT). Presently, a company pays income tax on its taxable profit. Thereafter, when it distributes the surplus profit to shareholder it needs to pay DDT at 20.56%. The Budget 2020-21 is likely to have a plan of action to combat slowdown. The GDP growth has already slowed down to a six-year low level of 4.5% in July-September quarter of FY20 while the direct tax collection in the current fiscal has fallen in the negative zone for the first time. he countdown to Union Budget 2020 will officially kick off on Monday as printing of Budget documents begins. The process will begin with the traditional ‘halwa’ ceremony at the North Block, which will be attended by Finance Minister Nirmala Sitharaman and other finance ministry officials. In this pre-Budget event, ‘halwa’ is prepared in a big ‘kadhai’ at Finance Ministry offices and served to the entire staff in the ministry. Once the Halwa is served and eaten, the officials and support staff directly associated with the Budget making and printing process have to stay in the ministry and cannot contact their families till the Budget is tabled before the Lok Sabha on February 1.Once the printing of Budget documents begin, the personnel locked inside the Finance Ministry are not allowed to communicate with the outside world, even their families, in any manner. Only very senior officials in the Finance Ministry are permitted to go home. (with inputs from Business Today)
