FinMin draws up 3-pronged plan to avoid rating downgrade

The finance ministry is very keen to act fast because it wants to break the perception of a policy paralysis before the rating agencies come for review. It feels harsh decisions will have to be taken.

There is a three-pronged strategy that the ministry is working on. First up, in the next one week one will probably see the Kelkar committee report on fiscal consolidation being submitted. Also, revenues pick up only in the second half of the year. The finance ministry is going to have some sense of the revenue aspect of the fiscal deficit.

Thereafter, it will put in place a roadmap by mid September. This will probably be just a week before the borrowing meeting for the second half of this fiscal, which is unprecedented. It’s the first time that a first supplementary was not introduced in this session of parliament.

So, clearly the government is intending to stick to that 5.1% fiscal deficit target.

Apart from this, the strategy is to revive domestic investment and for that they feel that cash rich PSUs should kick-start investment and hence the finance minister will meet PSU heads on the September 10 to discuss this.

The key obstacles to investment such as forest and land clearances will also be looked at and these procedures will be hastened.

Apart from this the finance ministry is also examining the UK Sinha committee report and the non-tax aspects of it. That is apart from the STT, long-term capital gains, the proposals to have a one single window for FIIs and all other investors are being looked at.

The FinMin is going to introduce a series of measures to bring back FII investment into the country. There is going to be a SEBI board meet in the next 10 days, which again will announce some more measures for revival of capital market investment. So, that is the strategy that finance ministry is working on at this point in time.