Can't spend what you don't have.

"The government is stitching together a set of measures, including tax cuts and targeted sops, to reverse an economic downturn, three people aware of the ongoing discussions said, amid fears of a global slowdown." A panel led by NK Singh had suggested relaxing norms for fiscal deficit, which has been fixed at 3.3% in the budget, by 0.5% which would allow the government to spend an additional Rs 1.5 trillion and the government is committed to spending Rs 100 trillion on infrastructure which will stimulate the economy. The government overshot its spending target by Rs 1.5 trillion in 2018-19 by keeping its borrowing 'off balance sheet'. "According to estimates, about Rs 1.5 lakh crore worth of expenditure may have been pushed off balance sheet as borrowings at Food Corporation of India (FCI), PowerGrid Corporation, and a few other entities." The government just increased surcharge on income tax of people earning over Rs 50 million. The parliament passed an amendment to the Companies Social Responsibility (CSR) Act , which forces large companies to spend 2% of profits on social schemes, making it a criminal offence to fail in spending the full amount, punishable by fines of Rs 50,000 to Rs 2.5 million and up to 3 years in prison for company officials. It is thus a tax on companies. A high level panel has recommended that violating CSR rules should not be a criminal offence and companies should be given tax relief on what they spend, thus reducing tax collections. Meanwhile, "In July, passenger car sales plunged 36% to 122,956 units, while utility vehicles recorded a 15% drop to 67,070 units. Vans suffered 46% decline to 10.804 units." The automobile industry employs vast numbers of people in manufacturing parts, in assembly plants and in dealerships. When sales fall companies respond by cutting their workforce, and unemployed people spend less further reducing tax collections. GST rates on cars varies from 29%-50%, so falling sales means less tax collections. Naturally, companies are clamoring for a cut in tax rates. "The latest data from the Controller General of Accounts (CGA) shows that the gross tax collections of the Union government in the quarter ending June grew 1.4% from the year-ago period, the slowest pace since the slump following the global financial crisis in fiscal 2010," wrote N Kwatra. The government had hoped to increase collections by bringing the unorganized sector, which has been avoiding taxes all these years, into the tax net but that has not happened because the rules are so complicated that many do not file returns while others are able to game the system. People who were not paying taxes could not save the money in banks because they would be caught and so were forced to spend all of it, wrote R Kishore. All avenues for tax avoidance have been closed off so consumer spending has dropped. If revenue is falling how will the government stimulate the economy by increased spending? How to square the circle?