Budget 2019: Govt may cut taxes on biz, hike spending for economic growth

In January-March, annual growth slumped to 5.8%, the slowest pace in 20 quarters. Growth for the financial year that ended in March was 6.8%, also a five-year low.

Budget 2019 : Prime Minister Narendra Modi's government on Friday will unveil a budget that is expected to cut taxes on business and raise spending in a bid to shore up consumption and faltering economic growth.

Analysts say Modi, boosted by a sweeping election victory, hopes to use the budget to restart reforms and deal with a series of economic woes.

In January-March, annual growth slumped to 5.8%, the slowest pace in 20 quarters. Growth for the financial year that ended in March was 6.8%, also a five-year low, and indicators such as plummeting industrial output and automobile sales have stoked fears of a deeper slowdown.

A shortfall in monsoon rains, pivotal for the farm sector that employs nearly half of India's workers, has increased concerns of rural distress and strengthened the case for intervention, a leader of Modi's ruling Bharatiya Janata Party (BJP) said.

"The focus of the budget will be to boost domestic consumption, address the rural crisis and support small manufacturers," Gopal Krishna Agarwal, BJP's economic affairs spokesman, told Reuters.

Shilan Shah at Capital Economics in Singapore said in a note "Given the recent economic slowdown, the finance minister is likely to announce more accommodative tax and spending measures."

In February, then-Finance Minister Piyush Goyal presented an interim budget for the year beginning April 1, to maintain government functions while a weeks-long election was under way.

BIG INVESTMENT PLANS

On Friday, new minister Nirmala Sitharaman will present a full-year budget that Agarwal said could lower corporate taxes for small and medium-sized businesses as well as personal ones to revive consumption by the middle class that gave Modi a second term, while withdrawing some tax exemptions.

In 2018, Indian government reduced the corporate tax rate to 25% from 30% for companies with annual turnover of 2.5 billion Indian rupees ($36.3 million) or less.

Following election promises, the government could present a plan for investing up to 100 trillion rupees ($1.45 trillion) on highways, railways and ports while budgeting another 25 trillion rupees for increasing farm productivity over five years, BJP officials said.