Modi reviews the state of the economy with Sitharaman, FinMin officials

Prime Minister Narendra Modi took stock of the economy on this Thursday, amid rising concerns over a slowdown, weak consumer confidence and increased loss of investor wealth from falling stock prices.

The review took place at the residence of the Prime Minister, after his Independence Day address to the nation. It was attended by Nirmala Sitharaman, finance minister and other top officials of her ministry. 

It is expected that the government will announce measures to restore the condition of the economy, including sector-specific sops, and also address the issue of a tax surcharge on foreign portfolio investors (FPIs). 

According to reports by ET, the PM will review the economy along with the finance ministry. Officials of the ministry prepared a presentation to the Prime Minister on the state of the economy. They also came up with possible measures that can be implemented in order to deal with the situation.

In the last few weeks, finance minister Sitharaman has organised a series of meetings with different segments of the industry including nonbanking and housing finance companies, MSMEs, automobile players, and market participants. 

The economic growth of India slowed to a five year low of 5.8% in the January-March quarter. It is expected to remain around that in the first quarter of the current fiscal year, with some important sectors like automobile showing the severe strain.

Passenger vehicle sales have reduced every month during the last year, except for October. In July, the fall was the sharpest in almost two decades at nearly 31%. The Reserve Bank of India, in the meantime, have cut growth forecast for the current year to 6.9% from 7% estimated earlier. 

AS reported by ET earlier this week:

“the finance ministry had sought the law ministry’s opinion on how relief could be provided to FPIs from a surcharge on the super-rich announced in the budget.”

The auto sector has sought a reduction in the goods and services tax rate to 18%, and lower registration and road tax levy. Passenger vehicles are levied GST at 28% plus a cess depending on the size of the vehicle. 

The real estate sector is in the grip of a serious demand issue and is grappling with stalled projects. It has sought cheaper loans and some ways to complete their projects. 

The benchmark stock index, BSE Sensex, has declined nearly 8% from its early June peak, rattled by global factors and the imposition of the surcharge announced in the budget that has impacted nearly 40% of FPIs that invest in India.