Year Ender 2019: 5 key steps taken by Finance Ministry to pull the economy out of crisis
India’s constant rise in the ‘Ease of Doing Business’ index is a testimony of govt’s intent and initiative towards building a 5 trillion dollar economy.
New Delhi: Prime Minister Narendra Modi’s vision and mission to make India a 5 trillion dollar economy may have hit a roadblock with economy plunging to new lows with each passing quarter but this may a temporary setback.
As every cloud has a silver lining, this crisis will also pass, say govt officials. 2019 has been a roller-coaster ride for Finance Minister Nirmala Sitharaman but that hasn’t dampened the spirit of government. The Finance Minister has been working tirelessly and taking concrete measures to not only stabilise the plunging economy but also bring back the lost momentum of once the world’s fastest-growing economy.
A few economic experts have painted a more grim picture of the ‘frail’ economy, predicting that slowdown may prevail for some time now. However, India’s constant rise in the ‘Ease of Doing Business’ index is a testimony of govt’s intent and initiative towards building a 5 trillion dollar economy.
Below are 5 crucial steps taken by Sitharaman to revive the ailing economy:
a) Corporate tax cut:
In the biggest reduction in 28 years, the government in September slashed corporate tax rates up to 10 percentage points as it looked to pull the economy out of a six-year low growth with a Rs 1.45 lakh crore tax break.
Corporate tax was slashed to 25.17% against existing corporate tax rate of 30%.
Base corporate tax for existing domestic companies was reduced to 22 per cent from 30 per cent, and to 15 per cent from 25 per cent for new manufacturing firms incorporated after October 1, 2019, and starting operations before March 31, 2023.
b) Merger of Public Sector Banks:
This was yet another bold step undertaken by FM Nirmala Sitharaman towards fiscal consolidation and enhancing the lending capacity of Public Sector banks. In August this year, Siitharaman announced merger of 10 public sector banks into 4 major entities.
This included merger of Punjab National Bank, Oriental Bank of Commerce and United Bank of India, making it 2nd largest PSB with Rs 18 lakh crore business.
“We want to create next-generation banks. You need big banks with enhanced capacity to increase credit… You need banks with strong national presence and global reach,” FM told reporters after announcement.
It may be noted that public sector banks have disbursed nearly Rs 5 lakh crore without compromising on prudential norms in the last two months to boost consumption in the hinterland.
(c) Affordable Housing Package:
On September 14, the Finance Minister announced Rs 20,000 crore fund to give fillip to the real estate industry. Since many realty developers are stuck in the middle of project owing to cash crunch or lack of demand, the Finance Minister took the lead in comforting the distressed sector.
The 20,000 crore fund was meant to help an estimated 3.5 lakh distressed middle-class home-buyers. She said that a special window will be set up to provide last mile funding for housing projects which are non-NPA and non-NCLT projects.
(d) Foregoing surcharge on FPI:
A crucial decision taken by Finance Minister was the foregoing enhance surcharge on FPI and along with this, foregoing surcharge on domestic investors in equity. Apart from this, upfront release of Rs 70,000 crore with additional lending and liquidity to the tune of Rs 5 lakh crore by providing upfront Capital to PSBs, was a noteworthy decision.
(e) Annual Mega Shopping Festivals:
This is latest in the series of announcements and also an out-of-the-box ideas by government to stimulate demand and give a strong impetus to economy.
The Finance Minister has said that India will have its own version of an annual shopping festival like Dubai. The theme of festival in each city will be different and span across sectors such as gems and jewellery, yoga, textiles, tourism and leather. This is being organized to benefit small and medium enterprises in the export sector.
What to expect next:
The GDP is on a downward spiral for last few quarters. Finance Ministry under Nirmala Sitharaman may be and should be worried over state of economy but that hasn’t prevented it from taking strong steps to revive the sagging economy. Many steps being considered – one among them is rationalisation of personal income tax rates to ramp up demand, as suggested by many economists. Many more lie in store in Budget 2020.