The slowdown-hit economy may soon get a booster dose from the government with Finance Ministry working on a stimulus package for the industry may include a slew of financial measures ranging from tax cuts, subsidies and other incentives.

Official sources said the package would not only aim to reduce the cost for the industry but would also lay out procedures that would further provide impetus to ease of doing business.

This could also include measures by the revenue department to ensure honest taxpayers are not harassed and those who commit minor or procedural violations are not subjected to excessive action. The Prime Minister has indicated about these measures in a recent media interview.

As concerned voices rise in India Inc over a consistent fall in demand, the measures would also try to address the issues of raising consumption by providing more money into the hands of consumers and reducing the prices of consumables by reducing indirect tax rates of a host of consumption items.

"The economy requires a critical intervention by introducing a stimulus package. We have suggested a package of over Rs 1 lakh crore," said BK Goenka, president, Assocham.

Already, a separate package is being looked for the auto sector that met Finance Minister Nirmala Sitharaman last week. The industry has sought lower GST rates on automobiles and introduction of a scrappage policy that incentivises new purchase. This is expected to beat the slowdown that has resulted in passenger car sales plunging 35.95 per cent in July.

The collapse of some large NBFCs (non-bank financial company) has been cited as a major factor for the sales downturn as these companies used to provide the bulk of automobile financing.

"We hope the government would come out very soon with a revival package of a sort to arrest the de-growth and to bring the industry back to growth path," SIAM's Director General Vishnu Mathur said.

The government will, however, have to weigh the size of the stimulus package given less-than-encouraging revenue position and a fiscal deficit that has risen to 3.4 per cent in FY19 due to expansionary policies of the previous governments. It has also been kept at a high of 3.3 per cent of GDP in FY20 as well meaning that this number would again have to be breached to offer a stimulus.

"The Finance Minister has held meetings with different segments of the industry to understand their concerns and get inputs on path to be taken to come of slowdown. Based on these, a package is being considered that may be announced soon," sources quoted earlier said.

The stimulus is also likely to cover the financial markets that have shown volatility in recent weeks and particularly after the presentation of Union Budget on July 5 that raised tax surcharge on FPIs.

While Finance Ministry officials are not indicating what changes could be made, sources said the matter has been discussed internally and certain changes in taxation on share markets could be announced. Ms Sitharaman met representatives of the financial sector on Friday.

In the financial sector, there is a possibility to relook at the long-term capital gains tax (LTCG). Sources said Finance Ministry is studying implications of withdrawing LTCG after the three-year holding period. The other taxation on the market transactions such as tax on dividend distribution may also rejigged and so is the case with tax on share buybacks introduced in Budget this year.

The Finance Ministry is working overtime to see that economy does not shrink any further as it might lead to a crisis situation where lakhs may lose their jobs. Already, auto sector is seeing job losses and this might soon spread to other sectors that are on the brink of a recession.