Economic Measures to Boost Economy | 24 Aug 2019

Recently, the Finance Minister had announced a slew of economic measures, which not only seek to revive economic growth (through fiscal stimulus) but also promised to end tax terrorism.

  • These measures were brought in the backdrop of the economic slowdown in India
  • The slowdown was also reflected by the major international economic institution which downgraded India's growth forecast,
    • For example, Moody’s Investors Service pared India’s growth estimate from 6.8% to 6.2% in the current fiscal year.
Economic Measure Effect
  • Extra Surcharge that was announced in Budget 2019, on any capital gain from the sale of shares has been scrapped.
  • The highest surcharge will thus be restored to the pre-budget level of 15%.
  • The Government will expedite capital infusion of Rs 70,000 crore for public sector banks announced in the budget 2019.
  • It will help banks to lend to firms and buyers, boosting demand for homes and automobiles.
  • Banks will be asked to link their loan rates to the central bank's repo rate
    • Currently, the repo rate is 5.4% vs SBI's 1-year MCLR of 8.25%.
  • It will check incomplete transmission of monetary policy and help buyers to get loans cheaper and faster.
  • Startups will be relieved as the angel tax had made it difficult to attract new funding.
  • National housing board will extend additional liquidity of Rs 20,000 crore to 7 housing finance companies, bringing the total support to Rs 30,000 crore.
  • This will help developers starved of funds to complete their stuck projects.
  • It will also alleviate the plight of buyers, waiting for years to get their homes.
  • The government is in favour of penalties rather than prosecution, as the earlier provision could attract a jail term of up to three years along with a fine.
  • This will ease liquidity for MSMEs who often have to wait for long to get GST refunds.
  • A single definition will remove ambiguity and improve the ease of doing business.
  • NBFCs will be able to access the KYC of customers and onboard them faster.
  • Customers will get loans quicker while those lenders will be able to improve their efficiency.
  • These economic measures are being dubbed as mini-budget.
  • These are based on the ideology of reform, perform and transform, as highlighted by the Indian Prime Minister.

Source: TH