Centre's move to revive economy, boost market sentiment: Key points
Highlights
- The government has announced a slew of measures in an attempt to boost market sentiment and revive the slowing economy
- The measures come a week before the first quarter GDP (gross domestic product) numbers are to be released
Finance minister Nirmala Sitharaman while addressing the media on Friday. (Photo: ANI)NEW DELHI: The government has rolled back recent tax hikes on foreign and domestic equity investors and accelerated a capital infusion of Rs 70,000 crore into state-run banks, finance minister Nirmala Sitharaman said late on Friday, in an attempt to boost market sentiment and revive the slowing economy.
The Centre also outlined a raft of measures including some for the crisis-hit autos sector, small businesses, and the troubled shadow banking sector to calm nerves of investors and lift consumer sentiment ahead of the festive season that begins next month.
The finance minister's hour-long speech was a sort of a mini-budget (the July budget speech was over 2 hours long) with a presentation of 32 slides (coincidentally the budget speech was 32 pages long) — making it, in a way, this year's third budget. The measures come a week before the first quarter GDP (gross domestic product) numbers are to be released, which are expected to point to a further slowdown (GDP growth has fallen to 5.8% from over 8% a year ago).
Here are the measures taken by the government along with specific reasons which prompted the move:
Tax relief
* Surcharge on foreign and domestic portfolio investors goes
* Super rich tax on HNIs to bereviewed in three years (2022)
* From October, all notices to be disposed of within 3 months of receiving reply
* Simplified KYC for FPIs
* Separate cell to deal with tax issues of startups
* Reason: Since July, FPIs have pulled out nearly $3.4 billion from stock market; companies are alleging ‘tax terrorism’
Revving up auto
* Additional 15% depreciation on inventory allowed
* Govt ban on buying new vehicles lifted
* Scrappage policy to be unveiled soon
* EVs, internal combustion engines to ply, revision of registration fee on hold till June 2020
* Reason: Move to push vehicle sales, which have slumped to near 2-decade low
Funds for banks, NBFCs (non-banking financial companies)
* Government to release Rs 70,000 crore for recapitalisation of PSU banks
* PSBs to unveil repo ratelinked products, reduce rates
* NHB (National Housing Bank) to provide additional liquidity of Rs 30,000 crore to home finance companies
* Improved one-time loan settlement policy for MSME, retail borrowers
* Better tracking of loan applications, documents to be released within 15 days of loan repayment
* Honest bankers to be protected
* Reason: Measures to step up lending, better transmission of rates, increase transparency
Help for micro, small and medium enterprises (MSMEs)
* Arrears of MSMEs to be cleared expeditiously, GST refunds in 30 days
* Decision to pay 75% of arbitration awards
* Law to be amended to better define MSMEs, definition may go beyond investment
* Reason: Improve fund flow, reduce stress in small businesses; multiple definitions hamper decision-making
Comfort to India Inc
* Violation of CSR (corporate social responsibility) mandate to be a civil offence
* Compounding, monetary penalty instead of prosecution to be favoured option
* Review of Companies Act to do away with prosecution
* Reason: Industry was worried about CSR violation being made a criminal offence
The Centre also outlined a raft of measures including some for the crisis-hit autos sector, small businesses, and the troubled shadow banking sector to calm nerves of investors and lift consumer sentiment ahead of the festive season that begins next month.
Oil is once again turning PM Modi’s friend with govt move to boost economy
US crude on Friday plunged over 3% to $53.58 per barrel. Right on cue, global benchmark Brent, which is more pertinent for India, fell 2% to trade at $$58.75 per barrel. Low oil prices will help boost demand and reduce input cost for farmers who use diesel to run equipment. Lower subsidy liability frees up funds for social sector and infrastructure spending.
The finance minister's hour-long speech was a sort of a mini-budget (the July budget speech was over 2 hours long) with a presentation of 32 slides (coincidentally the budget speech was 32 pages long) — making it, in a way, this year's third budget. The measures come a week before the first quarter GDP (gross domestic product) numbers are to be released, which are expected to point to a further slowdown (GDP growth has fallen to 5.8% from over 8% a year ago).
Here are the measures taken by the government along with specific reasons which prompted the move:
Tax relief
* Surcharge on foreign and domestic portfolio investors goes
* Super rich tax on HNIs to bereviewed in three years (2022)
* From October, all notices to be disposed of within 3 months of receiving reply
* Simplified KYC for FPIs
* Separate cell to deal with tax issues of startups
* Reason: Since July, FPIs have pulled out nearly $3.4 billion from stock market; companies are alleging ‘tax terrorism’
Revving up auto
* Additional 15% depreciation on inventory allowed
* Govt ban on buying new vehicles lifted
* Scrappage policy to be unveiled soon
* EVs, internal combustion engines to ply, revision of registration fee on hold till June 2020
* Reason: Move to push vehicle sales, which have slumped to near 2-decade low
Home, auto, other retail loans to become cheaper: Nirmala Sitharaman
The govt announced a slew of measures to ensure that loans for home, vehicles and consumption goods become cheaper and widely available through banking and non-banking finance companies. The 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.
Funds for banks, NBFCs (non-banking financial companies)
* Government to release Rs 70,000 crore for recapitalisation of PSU banks
* PSBs to unveil repo ratelinked products, reduce rates
* NHB (National Housing Bank) to provide additional liquidity of Rs 30,000 crore to home finance companies
* Improved one-time loan settlement policy for MSME, retail borrowers
* Better tracking of loan applications, documents to be released within 15 days of loan repayment
* Honest bankers to be protected
* Reason: Measures to step up lending, better transmission of rates, increase transparency
Help for micro, small and medium enterprises (MSMEs)
* Arrears of MSMEs to be cleared expeditiously, GST refunds in 30 days
* Decision to pay 75% of arbitration awards
* Law to be amended to better define MSMEs, definition may go beyond investment
* Reason: Improve fund flow, reduce stress in small businesses; multiple definitions hamper decision-making
Comfort to India Inc
* Violation of CSR (corporate social responsibility) mandate to be a civil offence
* Compounding, monetary penalty instead of prosecution to be favoured option
* Review of Companies Act to do away with prosecution
* Reason: Industry was worried about CSR violation being made a criminal offence
CSR violations not to be treated as criminal offence: Sitharaman
Allaying industry concerns, finance minister Nirmala Sitharaman said violations of Corporate Social Responsibility norms under the companies law will be treated only as a civil liability and not as a criminal offence. The corporate affairs ministry would review the sections concerned under the Companies Act.
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