A slew of measures have been announced by the Finance Minister Nirmala Sitharaman came at the right time. While the steps taken by policymakers to make amends for their previous policy errors are obviously welcome, they should not deflect attention from the larger and persistent issue of overreach by the government against investors. In a world of globalised capital markets, where many nimble emerging markets compete to attract capital from the developed world, India cannot afford to be seen as flip-flopping on its commitments.
In order to encourage investment in the capital market, it has been decided to withdraw the enhanced surcharge levied by the Finance Act (No 2) Act 2019 on long and short term capital gains arising from the transfer of equity shares and in other words, the enhanced surcharge on FPIs goes and the pre-Budget position is restored as of now. Simply infusing liquidity into the system repeatedly is not going to work. The structural issues have to be worked upon. Even if the financial sector has surplus credit, which it already has, it will not lend it because of large uncertainties in the market and breakdown of trust. The Govt. should remember that its role is that of a facilitator alone and should not be spoon-feeding the sector like in the per-liberalization era.
In a bid to address slowdown in the auto sector, the government announced a slew of measures including lifting ban on purchase of vehicles by government departments, and allowing additional 15 per cent depreciation on vehicles acquired from now till March 2020. Also, BS-IV vehicles purchased up to March 2020 will remain operational for the entire period of registration. In addition, allowing higher depreciation on vehicles bought before end of this financial year and boosting liquidity for purchase of vehicles were some of the measures announced by the Finance Minister as part of a three-part reform process out to be laid out over the next two weeks. The auto industry welcome the firm measures announced by the government. The host of positive measures announced has given the much required boost to the auto sector and also sets a clear road map. Auto industry is confident that these measures once implemented, will support growth and drive demand for the auto sector. These measures will provide the immediate relief that the industry was seeking. The promptness of this government’s response is reassuring for not just industry, but for the common man as well because it’s putting liquidity into the market and easing the squeeze on the small and medium sector.
Slew measures will work wonders only if GST rates are simultaneously cut. Not everyone purchases homes and can avail of credit facilities. Unless GST rates are cut very significantly where’s the scope fir improvement? This money is hardly sufficient to meet the needs of even 1 crore small business owners. This is insufficient. But certainly a very good beginning. The government also decided to front-load the Rs 70,000 crore of capital infusion in public sector banks that was announced in the Budget, a move aimed at increasing private investment by facilitating greater credit disbursal by the banks. According to the government, this Rs70,000 crore will lead to about Rs 5 lakh crore of fresh liquidity that can be loaned out. Centre responds to downturn with steps to boost growth. Slew of measures now announced and more to follow will see the light at the end of the tunnel.
(The views expressed by the author in the article are his/her own.)