Govt may breach fiscal deficit target; need for stimulus rises: Report

The government has set a 3.3 per cent fiscal deficit target for the current fiscal.

The government might breach the fiscal deficit target this financial year amid drop in the revenue mobilisation and expected additional expenditure by the government, says a report. According to Dun & Bradstreet’s Economy Forecast, the need for fiscal stimulus has increased even as the government finances remain “strained”.

“We expect that the drop in the revenue mobilisation of the government and likelihood of additional expenditure by the government might breach the fiscal deficit target in FY20,” Dun & Bradstreet India Chief Economist Arun Singh said. The government has set a 3.3 per cent fiscal deficit target for the current fiscal.

Singh further added that given the resources constraints, increase in fiscal deficit might lead to crowding out of private investments. According to the report, corporate liabilities are already higher. The balance-sheets of corporates, government, banks and households remain constrained or weak and revenue collection will play an important role.

“Revenue collection will thus be important for the government to implement a fiscal stimulus. To do that, tax reforms are needed. GST should be simplified further, and direct tax collections should increase,” Singh said. As per the report, the index of industrial production is likely to remain subdued in the short to medium term amid slowdown in demand, lackluster investment and weak exports….

Onion set to bring tears to consumer as retail price nears Rs 100 a kg

Vegetables surges by 10% to trade at Rs 55.5 a kg in Lasalgaon mandi. It is being sold for Rs 70-80 in retail across the country

Barely two days after the government showed conviction over price decline due to steady increase in supply, onion prices jumped by 10 per cent to trade at over four-year high of Rs 55.50 a kg in the benchmark Lasalgaon mandi on Monday.

Onion is currently trading between Rs 70 and Rs 80 in retail markets across the country and is approaching the Rs 100-mark fast. The rates have shown a four-fold increase in the last three months in wholesale markets from Rs 13 a kg in early August to Rs 55 now and retail price from Rs 20 to Rs 80.

Traders attribute the sudden spurt in prices to the very little quantity from last year’s production, crop damage due to unseasonal rain across the country and unfavourable government policy.

“Rain during October and November have so far resulted in widespread damage of the standing kharif crop. Thus, arrivals of early variety onion sown in South Indian states, including in Andhra Pradesh and Karnataka, were damaged. So, supply of new variety of onion, which was supposed to hit mandis in the second fortnight of October, is no longer available. Thus, onion prices are continuously rising,” said Jaydatta Holkar, chairman, APMC Lasalgaon.

Meanwhile, after banning onion exports and levying stock limit for domestic traders last month, the department of consumer affairs had convened a meeting of stakeholders last Friday. It concluded that the price increase was due to rain-driven supply disruption which has started improving in order to correct prices.

Monetary policy review: RBI set to cut rate. Question is by how much?

The policy decision will be announced at 11:45 a.m. in Mumbai, followed by a press conference 15 minutes later by Das

The Reserve Bank of India is set to deliver a fifth straight interest rate cut Friday, although economists are unsure of the quantum following an unconventional 35 basis-point easing last time.

While all 39 economists surveyed by Bloomberg News expect a reduction, their forecasts range from 15 basis points to 40 basis points. The RBI has lowered borrowing costs to a nine-year low of 5.4% through 110 basis points of easing so far in 2019.

The meeting of the six-member RBI Monetary Policy Committee led by Governor Shaktikanta Das comes amid growing concerns about India’s banking and financial sector, and just weeks after Prime Minister Narendra Modi eased fiscal levers by announcing a surprise $20 billion tax break for companies.

The policy decision will be announced at 11:45 a.m. in Mumbai, followed by a press conference 15 minutes later by Das.

Here’s a look at what else to watch out for:

Growth: The RBI has lowered its growth forecast for the current fiscal year three times already, with the latest revision in August pegging growth at 6.9%. Data since has shown gross domestic product expansion slowing to 5% in the June quarter, the weakest pace in six years. That may prompt the central bank to revisit the numbers once again.

The latest growth numbers “look much worse,” Das said recently, referring to RBI’s projection of 5.8% expansion in the April-June period. “There is a slowdown, which was evident and at the last MPC we very clearly said that growth seems to be losing traction and therefore, growth is a matter of highest priority.”