Booster pack for the economy announced by the Finance Minister! How this will help the Indian Economy?

The finance minister Mrs. Nirmala Sitharaman had bundle of announcements to make addressing the recent economic slowdown. Her choice of words, body language and ardent promises to do more in order to keep the hopes of businessmen and traders alive, is a proof that government has already sensed the challenges and it is in a right path to face the occasional bumps arising in making of ‘New India’.

It was even reassuring to see that the Narendra Modi government has accepted the slowdown instead of being in denial and blaming it as just another story spun by social media. To handle the gloom over the market during this festive season the finance minister made few important announcements.

Let’s see how they will change the current economic scenario.

Withdrawal of enhanced surcharge on FPI’s

In economics, foreign portfolio investment is the entry of funds into a country where foreigners deposit money in a country’s bank or make purchases in the country’s stock and bond markets. In a much needed relief to the FPIs, the government on Friday withdrew the enhanced surcharge on foreign investors.

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.

Data showed FPIs have pulled out Rs 23,000 crore from domestic equities in July and August, as the Budget proposed to levy a surcharge on higher tax-income groups affected 40 per cent of FPIs

Cheaper loans

The finance minister further said that banks have decided to pass on RBI rate cut benefits to borrowers. This will lead to easy and reduced monthly installments for housing, vehicle and other retail loans.

No angel tax

Angel tax is a term used to refer to the income tax payable on capital raised by unlisted companies via issue of share. The excess realisation of share than the fair market price is calculated and it is treated as income and taxed accordingly.

This tax was brought with an intention to curb money laundering.

Now the ‘angel tax’ provision will be withdrawn for startups and their investors. Angel tax has been a major issue among entrepreneurs and for the new startups.

GST refunds

all GST refunds of micro, small and medium enterprises (MSMEs) will be paid within 60 days from the date of application.

Auto sector boost

In order to boost demand, Government shall lift the ban of purchase of new vehicles to replace all old vehicles by government departments.

Government will encourage replacement of old vehicles within government departments.

Higher depreciation of 30 percent as against the existing 15 percent on vehicles purchased before March 31, 2020 will make corporates and  buyers to pre-pone purchases of vehicles.

The Finance minister also said that vehicles bought before March 31, 2020 will be valid for the entire duration of their registration period without facing any ban.

Boost for infrastructure

Sitharaman announced a booster investment of Rs 100 lakh crore on building modern infrastructure over the next five years.

Cash infusion:

To address liquidity problem, the government is ready infuse Rs 70,000 crore into public sector banks,

From ease of doing business to ease of living:

All tax notices to be issued from centralised system to ‘end harassment of taxpayers’. All old tax notices will be decided by October 1. issued through a centralised computer system. It will also have a computer-generated unique Document Identification Number (DIN).

Now Banks will offer cheaper loans for purchasing vehicles, houses and consumer goods. The non-banking financial companies (NBFCs) can use Aadhaar-enabled KYC for onboarding customers.

Global GDP growth rate is currently at 3.2% and is expected to go downwards. As a result of US-China trade war and currency devaluation, very volatile situation has developed in global trade. However, India’s growth rate higher in comparison with many countries.

Even on Friday, finance minister reminded  that India’s growth rate continues to be impressive compared to most of the countries.

This is a government that will never like to see a day when the economy under its watch will suffers fiscal slippage. One can, therefore, assume that changes proposed will certainly bring the slowing down economy on to a right track.

Dr Sindhu Prashanth