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2019

Recent Policy Measures for Revival of Indian Economic

Policy Measures for Revival of Indian Economic

Data indicates the United States, the world’s largest economy, may be headed for another recession. This could lead to another global economic slowdown. Many of the world’s other top economies may also be headed for troubling downturns.

The turmoil over Brexit has partly led the UK’s economy to slowdown in the second quarter. Growth has also stopped in Italy, amid political crisis and situation does not seem to be improving soon. Germany’s economy declined in the three months before June, according to new numbers, a troubling sign for the world’s fourth-largest market.

Argentina just went through one of the worst stock market crashes in decades after an allegedly corrupt politician nears power once more. Brazil and Mexico, two leaders of Central and South America’s economies, are expected to perform weakly this year.

Japan faces a recession, and it’s recently entered into a trade dispute with South Korea. Singapore, another Asian economic engine, is also on the brink of recession. Months of protests in Hong Kong have brought the financial hub’s economy to a standstill, and also there is a looming threat of a possible Chinese military intervention. On top of it all, China’s growth rate has slowed due in large part to the trade war launched by President Donald Trump.

The International Monetary Fund, a world body that helps keep the global economy stable, also sees a possibility of global economic recession. Last month, it cut its projection for global growth to 3.2 percent, the lowest rate since 2009.

Impact on India:

The trade war between US and China is a matter of concern for India as well. Both the USA and China are very important trade partners for India. Hence, a slowdown in these economies is likely affect badly to Indian economy as well.

Measures by the Finance Ministry:

Considering the possibilities of global economic slowdown, Finance Minister Nirmala Sitharaman has announced some important measures that will be taken by the Government to support Indian Economy amid global recessionary trends. She made these announcements in a press conference on 23rd August 2019, Friday. Below are the highlights of the key points:

1. Empowering the Public Sector Banks:

  • The FM announced upfront capital infusion of Rs 70,000 crore into public sector banks, a move aimed at boosting lending and improving liquidity situation.
  • The move is expected to generate an additional lending and liquidity in the financial system to the tune of Rs 5 lakh crore, she said at a press conference.


2. Relief to Foreign Portfolio Investors:

  • Giving in to the demands of overseas investors, Finance Minister Nirmala Sitharaman on Friday announced rollback of enhanced surcharge on foreign portfolio investors levied in the Budget.
  • Surcharge on long and short term capital gains arising from transfer of equity shares has been withdrawn, she said.
  • Data showed FPIs have pulled out Rs 23,000 crore from domestic equities in July and August, as the Budget proposal to levy a surcharge on higher tax-income groups affected 40 per cent of FPIs, operating as trusts or AoPs, and made investment in Indian equities unattractive.

3. Relief for Auto Sector:

  • BS IV vehicles bought before 31st March 2020 will remain operational for their full period of registration. Further, the FM also deferred the decision to hike the one time registration fee on vehicles till June 2020.
  • The FM also lifted the ban on purchase of vehicles by government departments, and allowing additional 15 per cent depreciation, taking it to 30 per cent, on vehicles acquired from now till March 2020.
  • Besides, both electric vehicles (EVs) and Internal Combustion Vehicles (ICV) will continue to be registered.
  • The minister said the government's focus will be on setting up of infrastructure for development of ancillaries/components, including batteries for exports.
  • Also, the government will soon come up with a scrapping policy for the vehicles.

4. Cheaper Loans:

  • The finance minister further said that banks have decided to pass on RBI rate cut benefits to borrowers through MCLR reduction.
  • Further, banks will launch repo rate and external benchmark-linked loan products that will lead to reduced easy monthly installments for housing, vehicle and other retail loans.

5. No angel tax:

  • In a major relief to entrepreneurs and startups, the FM said that the 'angel tax' provision will be withdrawn for startups and their investors.
  • Angel tax has been a major issue among entrepreneurs and in the startup ecosystem.
  • Although the government announced some measures earlier, but the startups were not satisfied and wanted a complete revocation of the tax liability.
  • Sitharaman also announced several other measures to ease tax liabilities and address the ongoing concerns of tax harassment by tax officials.

6. GST Refunds:

  • MSMEs to get all their pending GST refunds within 30 days.
  • Further, all GST refunds of micro, small and medium enterprises (MSMEs) will be paid within 60 days from the date of application.
  • The FM also said the decision on recommendations of the U K Sinha Committee regarding ease of credit, marketing, technology and delayed payments to MSMEs will be taken within 30 days.
  • The government would also consider amendment to the MSME Act to move towards a single definition.

7. Other Important Announcements:

  • 1 Day to incorporate a company: Central Registration centre for name reservation & incorporation. Integrated Incorporation Form.
  • Shifting of 16 offence sections to monetary penalty only.
  • Faster and easier approvals for Merger and Acquisitions.
  • Modifications in the provisions of Differential Voting Rights.
  • Withdrawal of over 14 thousand prosecutions under Companies Act.
  • Robust IBC framework with amendments supporting MSME and Home buyers.
  • CSR Violation is not to be treated as criminal offence.
  • Support to NBFCs / HFCs : Additional liquidity support to HFCs Rs. 20,000 Cr by NHB thereby increasing it to Rs. 30,000 Cr.
  • Rs. 100 lakh crore for developing modern infrastructure over 5 years: An inter-ministerial task force is being formed by Department of Economic Affairs to finalize the pipeline of infrastructure projects.

 

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