No Plans To Revise Fiscal Deficit Target, Cut Spending: Finance Minister Nirmala Sitharaman
The government cut corporate tax rates on Friday in a move designed to woo manufacturers, revive private investment and consumption and lift growth from a six-year low.
New Delhi: The government has no plans to revise the fiscal deficit or cut any expenditure following the corporate tax cuts, Finance Minister Nirmala Sitharaman said on Sunday. The government cut corporate tax rates on Friday in a move designed to woo manufacturers, revive private investment and consumption and lift growth from a six-year low. With the corporate tax cuts cost Rs 1.45 lakh crore to the exchequer, Sitharaman said that the government is not planning to cut its expenditure to meet the shortfall. The Minister had earlier said infrastructure ministries has been asked to front load expenditure to revive capital expenditure to boost growth. The Expenditure Secretary is meeting secretaries of line ministries to fast-track their allocated spending to boost the economy, she added.
Sitharaman now said the government would only review the fiscal deficit target closer to the 2020-21 budget. "At this point of time we are not revising any target. The decision will be taken later," she told reporters at her residence here, adding that there was no plan to cut spending currently. Sitharaman said the move to cut corporate tax rates is a "calculative risk" and she has not revised any of the revenue or expenditure targets for the fiscal year yet. "I will take a review closer to the stage when revised estimates will be estimated," she said.
She also said the government would decide on additional market borrowings for the second half of 2019-20 later. Ratings firm S&P Global said on Friday India's move to cut corporate tax rates was a "credit negative development" despite potentially boosting the economy as it will widen its fiscal deficit. Global rating agency Moody's said on Saturday that the corporate tax reduction is credit positive for companies but increases the government's fiscal risks.
Government sources told Reuters this month that India is likely to miss its fiscal deficit target for the current financial year and, toward the end of 2019, be forced to raise it to 3.5 per cent of GDP from 3.3 per cent after economic growth fell to a six-year low of 5 per cent in the April-June quarter. Though equity markets welcomed the move, bond yields spiked to a near three-month high on speculation that the government may have to borrow more to meet its spending needs. On September 20, Sitharaman announced a reduction in the base corporate tax rate to 22 per cent from 30 per cent as part of stimulus measures to revive the slowing economic growth.
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