Bank Indonesia (BI) has applauded the government's plan to revise up the non-taxable income threshold to strengthen the people's purchasing power amid the global economic slowdown.

BI Governor Agus Martowardojo said the fiscal incentive was needed as Indonesia could no longer rely on exports to boost the economy amid the persistent decline of commodity prices.

"The fiscal measure is one of our recommendations to drive the domestic economy amid the sluggish global economy. We applaud the initiative to increase the non-taxable income threshold," he said in Jakarta on Friday.

Despite the potential for an increase in people’s purchasing power to increase inflation, Agus expressed his optimism that the year-end inflation would be in line with the central bank’s target of around 3 percent to 5 percent.

"The fuel price adjustment had a good effect on inflation," he said.

Earlier, Finance Minister Bambang Brodjonegoro said the non-taxable income threshold for individual taxpayers would be increased from Rp 3 million a month to Rp 4.5 million as of June.

Based on the ministry's estimations, the measure will boost Indonesia's economic growth by 0.16 percent this year. However, it will reduce the state’s tax revenue from individuals by Rp18 trillion.