Government Has Limited Scope To Provide Fiscal Stimulus: Report

Amid buzz of talks between the Finance Ministry and the Prime Minister's Office over a stimulus to revive growth, a report has said that the government has limited scope to provide a fiscal stimulus given the fiscal constraints.

Markets have shown slight recovery over the news that the government is working on a stimulus package for India Inc and that tax on the Foreign Porfolio Investors (FPIs) may also be tweaked. 

"The government has limited scope to do fiscal stimulus given fiscal constraints. It raised taxes across the board in the FY2020 budget. The RBI might cut policy rates by another 15-40 bps (up to 150 bps in the current rate-cutt ing cycle) but that may not be sufficient to revive economic growth," the Kotak report said. 

The report also added that the overall market valuations offer little in terms of investment inputs currently. 

Besides, Kotak said that the 1QFY20 results did little to lift the gloom with many companies missing our already low expectations and guiding to weak demand conditions for another two to three quarters. 

"Net profits of the Nifty50 Index grew 1.8 per cent yoy, 0.8 per cent above expectations driven largely by banks but EBITDA declined 3.4 per cent," it added.