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India Slashes Taxes, Widens Budget Deficit to Spur Economy – Financial Post

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(Bloomberg) — India’s finance minister slashed taxes for individuals and widened budget deficit targets for the current and next fiscal years to help spur a slowing economy.

The government will miss its deficit goals for a third year, pushing the shortfall to 3.8% of gross domestic product from a planned 3.3% in the year ending March, Finance Minister Nirmala Sitharaman said in Parliament in New Delhi Saturday. The deficit target for the coming fiscal year starting April 1 was widened to 3.5%.

Personal income tax rates for individuals were lowered as part of a goal to lift consumption in an economy that’s set to grow 5% this fiscal year, the weakest pace in more than a decade.

Read More: The Crisis That Shattered India’s Economic Dreams

“This is a budget to boost incomes and enhance purchasing power,” Sitharaman said at the beginning of a speech that lasted more than two and a half hours.

Tax cuts for individuals, outlined below, will cost the government 400 billion rupees ($5.6 billion) in revenue, she said:

The minister’s top adviser on Friday urged her to relax the deficit goal for the current year, saying reviving economic growth was an “urgent priority.” The adviser’s Economic Survey, a report that Sitharaman presented to lawmakers on Friday, estimates growth will rebound to 6%-6.5% in the year starting April.

Sitharaman used a provision in fiscal laws to enable the government to breach a mandated goal to bring the deficit down to 3% of GDP by the year ending March 2021.

Economists were muted in their reaction, saying the steps announced won’t be a sufficient boost for the economy.

“Overall, we see the budget as largely neutral for short-term growth,” said Sonal Varma, chief economist for India and Asia ex-Japan at Nomura Holdings Inc. in Singapore.

The deficit will be funded by a record market borrowing of 7.8 trillion rupees in the coming year. The government also plans to give foreign investors greater access to the nation’s debt, a move seen as a precursor to getting its securities included in global bond indexes.

Stocks Slump

India’s benchmark S&P BSE Sensex stocks index extended its decline to as much as 1.9% in Mumbai Saturday after Sitharaman proposed levying a dividend distribution tax on investors instead of companies, and announced abolishing some tax exemptions. The bonds and currency markets were shut.

“It is not a full-frontal fiscal stimulus that the markets were hoping for,” said Rini Sen, an economist at Australia & New Zealand Banking Group Ltd. in Bengaluru

Moody’s Investors Service said the budget highlights the challenges to fiscal consolidation. India’s government debt is already “significantly higher” than the average for its Baa-rated peers, said Gene Fang, associate managing director of sovereign risk.

“Sustained weaker growth and tax cuts would make gross revenue targets difficult to achieve,” he said. “The government also has limited room to reduce expenditures without further weakening growth.”

Sitharaman said the budget was based around three main themes: an “aspirational India, economic development for all and a caring society.”

Here are some other highlights of her speech:

Markets: Abolishing dividend distribution tax for companies will entail a revenue loss of 250 billion rupeesFinancial sector: The government will sell its stake in IDBI Bank Ltd. and list state-owned Life Insurance Corp. of India on the stock exchangeExcise duties: Tax on cigarettes and other tobacco products to be increasedRural: Farm, rural sectors to be allocated 2.83 trillion rupees in the budget; agriculture credit target for next year set at 15 trillion rupeesInfrastructure: Transport infrastructure to be allocated 1.7 trillion rupees; a sum of 3.6 trillion rupees earmarked for piped water projects; power, renewable energy sector to get 220 billion rupeesEducation: 993 billion rupees allocated to sector; foreign investment will be allowed in education as well as overseas borrowing by institutionsInvestment: A program proposed to encourage the making of mobile phones, medical devices; proposal to allow private sector to build data center parks

“The budget is an acknowledgment that the fiscal isn’t looking good,” Ananth Narayan, a senior India analyst at Observatory Group told BloombergQuint. “The fiscal space for doing something big wasn’t there.”

Bloomberg.com

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Singapore cuts 2020 GDP outlook again as virus batters economy – TheChronicleHerald.ca

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By Aradhana Aravindan and John Geddie

SINGAPORE (Reuters) – Singapore downgraded its 2020 gross domestic product forecast for the third time on Tuesday, the trade ministry said, as the bellwether economy braces for its deepest ever recession.

The city-state lowered its GDP forecast to a contraction range of -7% to -4% from the prior range of -1% to -4%.

Singapore’s economy shrank 0.7% year-on-year in the first quarter and 4.7% on a quarter-on-quarter, a less severe decline than advance estimates, although officials and analysts warned of more pain ahead.

“There continues to be a significant degree of uncertainty over the length and severity of the COVID-19 outbreak, as well as the trajectory of the economic recovery,” said Gabriel Lim, permanent secretary at the ministry of trade and industry.

Following the news, the central bank chief economist Ed Robinson said monetary policy remains unchanged and will next be reviewed in October, as planned.

Singapore also downgraded its 2020 forecast for non-oil domestic exports to -4.0% to -1.0%, from -0.5% to 1.5% previously.

Exports have been a rare bright spot for the economy in recent months mainly due to a surge in demand for pharmaceuticals.

Analysts expect the trade-reliant economy to see a deeper contraction in the second quarter due to a two-month lockdown, dubbed a “circuit breaker” by authorities, in which most workplaces closed to curb the spread of the novel coronavirus.

The city-state has among the highest number of infections in Asia and has said that easing of the lockdown from next month will only be done gradually.

“The downward revision…implies a significant deterioration in the second-quarter momentum due to the circuit breaker period as well as a weak recovery trajectory,” said Selena Ling, OCBC Bank’s head of treasury research and strategy.

The government first flagged the possibility of recession in February when it cut its 2020 GDP forecast to -0.5% to 1.5%, from 0.5% to 2.5% previously.

Singapore’s finance minister is set to deliver the latest in a string of multi-billion-dollar economic packages to offset the hit to businesses and households from the pandemic later on Tuesday.

(Reporting by John Geddie, Aradhana Aravindan and Fathin Ungku; Editing by Sam Holmes)

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Singapore cuts 2020 GDP outlook again as virus batters economy – The Guardian

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By Aradhana Aravindan and John Geddie

SINGAPORE (Reuters) – Singapore downgraded its 2020 gross domestic product forecast for the third time on Tuesday, the trade ministry said, as the bellwether economy braces for its deepest ever recession.

The city-state lowered its GDP forecast to a contraction range of -7% to -4% from the prior range of -1% to -4%.

Singapore’s economy shrank 0.7% year-on-year in the first quarter and 4.7% on a quarter-on-quarter, a less severe decline than advance estimates, although officials and analysts warned of more pain ahead.

“There continues to be a significant degree of uncertainty over the length and severity of the COVID-19 outbreak, as well as the trajectory of the economic recovery,” said Gabriel Lim, permanent secretary at the ministry of trade and industry.

Following the news, the central bank chief economist Ed Robinson said monetary policy remains unchanged and will next be reviewed in October, as planned.

Singapore also downgraded its 2020 forecast for non-oil domestic exports to -4.0% to -1.0%, from -0.5% to 1.5% previously.

Exports have been a rare bright spot for the economy in recent months mainly due to a surge in demand for pharmaceuticals.

Analysts expect the trade-reliant economy to see a deeper contraction in the second quarter due to a two-month lockdown, dubbed a “circuit breaker” by authorities, in which most workplaces closed to curb the spread of the novel coronavirus.

The city-state has among the highest number of infections in Asia and has said that easing of the lockdown from next month will only be done gradually.

“The downward revision…implies a significant deterioration in the second-quarter momentum due to the circuit breaker period as well as a weak recovery trajectory,” said Selena Ling, OCBC Bank’s head of treasury research and strategy.

The government first flagged the possibility of recession in February when it cut its 2020 GDP forecast to -0.5% to 1.5%, from 0.5% to 2.5% previously.

Singapore’s finance minister is set to deliver the latest in a string of multi-billion-dollar economic packages to offset the hit to businesses and households from the pandemic later on Tuesday.

(Reporting by John Geddie, Aradhana Aravindan and Fathin Ungku; Editing by Sam Holmes)

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Canadians are starting to feel a little better about the economy — but not about the housing market – Financial Post

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Consumer confidence continues to show signs of improving in Canada, inching higher for a fourth straight week.

The Bloomberg Nanos Canadian Confidence Index, based on a random survey, ticked up slightly to 39.3 last week. While the index remains near its worst-ever readings recorded last month, the rise in confidence in recent weeks suggests negative sentiment may be finding a floor amid talk of reopening the economy. Sentiment around housing, however, remains at near-record lows.

Every week, Nanos Research surveys 250 Canadians for their views on personal finances, job security and their outlook for the economy and real estate prices. Bloomberg publishes four-week rolling averages of the 1,000 responses.

The polling suggests the mood is still dire, but with improvements on most questions.

Regionally, the gains in sentiment have been mostly in Western Canada, aided by a recent rebound in oil prices and relatively fewer coronavirus cases — British Columbia, for example, has one of the lowest death rates in North America. Confidence in Ontario and Quebec remain at near record lows.

The share of Canadians who say their personal finances have worsened over the past year dropped to 36.7 per cent, from as high as 42.3 per cent last month. That’s still about 10 percentage points above the average for this question over the past five years.

Canadians remain sour about the nation’s economic outlook, but are less pessimistic than they were a few weeks ago. About 73 per cent of respondents believe the economy will worsen, down from 80 per cent last month.

About one in five Canadians remains worried about job security, about double the historical average for the question. That’s down from a peak of about 25 per cent a few weeks ago.

Housing is an outlier. Even as sentiment has improved around the economic outlook and personal finances, expectations around real estate are weakening. Over the past two weeks, almost half of respondents anticipate a drop in home prices, which is a record and about three times above the average for this question.

Bloomberg.com

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