Issues related to Economic growth

Centre responds with steps to boost economic growth

Note4Students

From UPSC perspective, the following things are important :

Prelims level : Various terms mentioned in the news

Mains level : Measures to stabilise economic slowdown


  • The Finance Minister has announced a series of measures to boost economic growth.
  • It decided to reduce the burden on the private sector, including withdrawing the controversial surcharge on Foreign Portfolio Investors (FPIs) and reiterating the PM’s statement that the government “respects all wealth creators”.
  • FM clubbed the 33 measures into five buckets: taxation, banks/ NBFCs/ SMEs, financial markets, infrastructure, and the automotive sector, which has visibly been one of the worst hit leading to many direct and indirect job losses.

Major announcements

  • Announcing that the global GDP growth may be revised downwards from the current estimate of 3.2%, India’s GDP continues to grow at a faster pace than the global economy and any other major economy.

FPI

  • Rollback of enhanced surcharge on foreign portfolio investors levied in the Budget, to encourage investment in the capital market.
  • Angel tax provisions to be withdrawn for startups and their investors.
  • A dedicated cell under a member of CBDT will be set up for addressing the problems of startups.

GST refunds of MSME

  • All pending all GST refunds of micro, small and medium enterprises (MSMEs) will be paid within 30 days. Also, in future, all GST refunds of MSMEs will be paid within 60 days from the date of application.

Loans, repo rate

  • Loans for home, vehicles and consumption goods to become cheaper and widely available through banking and non-banking finance companies.
  • 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.
  • Working capital loans for industry to become cheaper.
  • Public sector banks (PSBs) will ensure mandated return of loan documents within 15 days of loan closure.
  • NBFCs will be permitted to use the Aadhaar authenticated bank ‘Know Your Customer’ (KYC) to avoid repeated processes.

Auto sector

  • BS-IV vehicles purchased up to March 2020 will remain operational for the entire period of registration, FM said.
  • Both electric vehicles (EVs) and Internal Combustion Vehicles (ICV) will continue to be registered.
  • Centre to lift ban on purchase of new vehicles for replacing all old vehicles by government departments.
  • Additional 15 per cent depreciation on vehicles acquired from now till March 2020.
  • Focus will be on setting up of infrastructure for development of ancillaries/components, including batteries for exports.

Infrastructure

  • Proposal to establish an organisation to provide credit enhancement for infrastructure and housing projects with an aim to enhance fund flows towards such projects.

Easing surcharges

  • The surcharge of 3 per cent and 7 per cent on those earning between Rs 2 crore and Rs 5 crore, and over Rs 5 crore respectively had been announced by Sitharaman as part of her Budget proposals.
  • This had led to different taxation outcomes for FPIs registered as Association of Persons or trusts and companies, even as those registered as companies were spared of this surcharge.
  • Ever since the budget announcement, markets have been seeing a selloff on most trading days, largely in light of the FPI impact.
  • These announcement reverses the levy imposed in the budget.

Easing CSR rules

  • The amendment to the Companies Act, passed earlier this month, introduced harsh penalties including jail term for non-compliance on CSR (corporate social responsibility) by listed companies.
  • This had been slammed by industry as a regressive move, especially given the fact that in the last five years, the total CSR spend of companies has progressively jumped from 70% to over 90% now, according to data sourced from Prime Database.

Capital infusion in PSBs

  • The government also decided to front-load the ₹70,000 crore of capital infusion in public sector banks that was announced in the Budget.
  • It was aimed at increasing private investment by facilitating greater credit disbursal by the banks.
  • According to the government, this ₹70,000 crore will lead to about ₹5 lakh crore of fresh liquidity that can be loaned out.

Taxmen reined in

  • The government has also significantly curbed in the discretionary powers of the tax authorities.
  • From October 1 onwards, all notices and summons by the Income Tax Department would be generated by a centralised computer and would carry a unique code.

Housing finance

  • The Centre has announced an additional ₹20,000 crore of liquidity to the housing finance companies, over and above the ₹10,000 crore earlier announced.
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