Ahead of the inauguration of Prime Minister Narendra Modi’s second term, a top industrial body has expressed concerns over India’s slowing economic growth.
The economy grew 6.6% in the three months to December – the slowest pace in five quarters – and the Federation of Indian Chambers of Commerce & Industry (FICCI) said the bigger worry was that domestic consumption was not growing fast enough to offset a weakening global economic environment.
The FICCI in a statement suggesting measures the government could adopt in the next budget expected in a month, said “the recent signs of a slowdown in the economy stem not only from slow growth in investments and subdued exports but also from weakening growth in consumption demand”
“This is a matter of serious concern and if not addressed urgently, the repercussions would be long term.”
Modi – who won a majority in the general election despite the agricultural sector’s economic woes, a shortage of jobs and the stuttering economy will take the oath of office on Thursday and will need a finance minister who can help navigate through the challenges facing the economy.
FICCI said the new government should cut corporate and individual taxes, expand a programme of handing 6,000 rupees ($86) a year to poor farmers to boost consumption demand and consider tax concessions for export-oriented manufacturers.
The Confederation of Indian Industry, another industry body, said it was crucial to reduce the income tax burden and expand the scope of investment allowance to all sectors, while higher incentives should be given to exporters.
When Modi took power for the first time in 2014, global oil prices slumped. But as he gets set for a second term, rising oil prices could push the current account deficit higher.
The body also said the trade war between the United States and China could further slow down global trade and hurt India’s already sluggish exports.