The government is thinking of spending Rs 50,000 crore to boost the country's slowing economy, at the cost of not meeting its fiscal deficit target for 2017-18. According to the officials who spoke about the extra government spending, it is estimated to widen the fiscal deficit for 2017-18 to 3.7 percent of the GDP from a budgeted target of 3.2 percent.
The officials did not wish to be named. Growth in the June quarter slowed to a three-year low of 5.7 per cent, and finance minister Arun Jaitley has been consulting with his Cabinet colleagues and senior officials on a plan to revive the economy.
On Thursday, the minister suggested that real estate can be brought under the justintroduced Goods and Services Tax. "We are analysing the economic indicators and appropriate action will be taken at right time," the Finance Ministry tweeted Jaitley as saying at an investor meet.
Two years ago, India was touted as a rare bright spot in a gloomy global economy with the GDP growth outpacing a slowing China. But since early 2016, the growth has fallen for six consecutive quarters. In the June quarter, India lost the fastest growing economy tag to China for the second straight quarter.
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The slowing economy was also hit by the demonetisation exercise last November, which wiped out 86 per cent of the cash in circulation and affecting people's ability to spend. The taxation overhaul in the form of the Goods and Services Tax rolled out in July has also affected many small businesses.
Exports are also facing strong headwinds and the industrial growth is the lowest in five years. The current account deficit, the difference between inflow and outflow of foreign exchange, has risen to 2.4 per cent of GDP in April-June.
The government may spend the extra money on bank recapitalisations, rural jobs programme and rural housing. The officials said The Prime Minister will take the final decision on stepping up the additional spending, the officials said.