Many pain points that affect the economy were addressed
NEW DELHI: The Finance Minister Nirmala Sitharaman on Friday left ‘nothing’ to be desired in announcements aimed at addressing the pains of the markets and economy at large.
At the press briefing, she also sought to drive home the prime minister’s message that the government “respects all wealth creators”.
The finance minister stressed that there will be more such briefings coming up in the next two weeks to announce further new decisions from the government. “This is going to be an on-going process,” she said.
The market listened with bated breath to hear from the minister predominantly what she had to say about the ‘enhanced surcharge’ that had rendered a body blow to the stock markets pulling the market indexes by about 10 per cent down through the past few weeks since the budget day.
There was also strong anticipation that there would be some announcements to pep up the sagging morale of the auto industry that has been spluttering for some time for want of demand leaving the inventories heaping and tens of thousands of jobs at risk.
The FM sought to pull out all stops and spelt out announcements that touched upon more areas than were widely speculated.
As expected the surcharge was scrapped. “On surcharge, the pre-budget rates will prevail,” she said. Moreover, there were steps to bring down the lending rates, moves to ease the liquidity crisis among the NBFCs, proposals to increase the sales of auto industry, processes to help the MSMEs recover their GST refunds speedily, ideas to ease the burden of start-ups, etc.
The economic situation in the country has been so grave that the Niti Aayog Vice Chairman Rajiv Kumar has on Thursday described the current slowdown as an “unprecedented situation that India has not faced in last 70 years”. It remains a fact that his comments have come at a time when the country’s economy is facing the worst pace of growth in nearly five years, and the FM’s new initiatives should be viewed in this context.
As everyone knows, at the heart of the issues that spooked the stock market was the surcharge on FPIs, who sold Indian stocks (net) valued at over $3 billion over the last couple of weeks.
The minister tried to send out an important message that this government is not game for prosecution. Sitaraman said while briefing the press that the CSR violation will henceforth be not treated as criminal offence and will be dealt with through monetary penalties.
Rate cuts to be passed on effectively
It has been a long-standing compliant that the banks have not been keen on transferring the rate cuts to the borrowers on a timely manner. Even the RBI Governor Shaktikanta Das himself has highlighted this issue on several occasions. But the minister informed that the she was happy to say that the banks during the meetings with her during the last two weeks, volunteered to pass on the rate cuts to the customers immediately after the RBI announcements in this regard.
Moreover, the banks will soon come out with repo rate linked products which may further bring down the lending rates in the market and this could work as a stimulus that can boost all segments across the economy.
More funds for home loans
The Centre has also decided to make available additional Rs20,000 crore of funding to the housing finance companies over and above the Rs10,000 crore earlier announced. This can work to a good extent to pull the home loan market from an incipient slowdown.
MSMEs will get all their pending GST refunds within 30 days. Further, the government will make sure that all GST refunds of micro, small and medium enterprises (MSMEs) will be paid within 60 days from the date of application. The minister also said the decision on recommendations of the UK Sinha Committee regarding ease of credit, marketing, technology and delayed payments to MSMEs will be taken up within 30 days. The government would also consider amendment to the MSME Act to move towards a single definition for MSME.
Big boost for auto sector
The FM steered clear of the confusion surrounding the BS-4 vehicles’phase-out. Bharat Stage 4 (BS-4) vehicles purchased up to March 31, 2020 will remain operational for the entire duration of their registration. Further, centre will remove the ban on purchase of new vehicles for replacing all old vehicles by Government departments. The government is also seriously considering the implementation of a ‘Scrappage Policy’ to boost the demand for automobile units.
Centre will infuse Rs70,000 crore into the public sector banks upfront to boost the capital base of these banks. This will unlock about Rs5 lakh crore of new lending avenues for the public sector banks
Angel tax to go
The Centre has also announced the withdrawal of the angel tax for start-ups and their investors. Referring to this, the minister clarified that the Section 56 2 (b) of the Income Tax Act will not be applicable to start-ups registered under the Department for Promotion of Industry and Internal Trade (DPIIT).