India unveils economic stimulus-- from homes to cars to banks to infrastructure to equity markets
- Foreign investors had pulled out billions from India's equity market ever since the tax surcharge was announced in the latest budget.
- The Narendra Modi government also announced a slew of measures including tax reforms to revive a sluggish economy.
Finance Minister Nirmala Sitharamanand her team addressed a press conference to restore the faith in the economy and the government.
- Reform is a continuous process, she said in her opening remarks.
The latest budget for the financial year ending March 2020 imposed an additional tax on the country's super rich and foreign portfolio investors (FPIs) got caught in the crossfire. The subsequent anger and market sell-off has wiped off billions of rupees in share market wealth since then as foreign investors rushed for the exit.
Most foreign portfolio investors in India operate as non-corporate entities such as trusts and associations, which are taxed like individuals and therefore the additional tax would fall on them.
The government will lose ₹1,400 crore by rolling back the additional surcharge imposed in the latest budget.
Not just the surcharge on capital gains, there are other tax reforms too
All pending tax notices in India will be cleared by October 1, Finance Minister Nirmala Sitharaman declared. If any case must continue, the notice will have to renewed once again after October 1 for it to be applicable.
All refunds of the goods and services tax (GST) pending so far will be cleared within the next 30 days. All future refunds will have to paid within 60 days.
"Reform is a continuous process," she said in her opening remarks adding that tax scrutiny will be 'faceless' from Vijaya Dashami day, the last day of the Indian festival of Dussehra.
The idea is to ensure there is no physical interface between the taxman and the assessee to avoid any harassment of the taxpayer. "We are inclined to move from the prosecution route to more humane approach. I want companies and the media to see that at no point, the intention of the government is to take the prosecution route," Sitharaman said.
"Issue of IT orders -- notices, summons, etc-- will go through a centralised computer system from October 1," she said. This would mean that any tax demand will be approved by a central authority. "Any notice issued with a computer generated unique document identification (DIN) number will not be valid," she said.
India moves to make home loans cheaper and easier
The National Housing Board will given additional ₹20,000 crore to be further lent to housing finance company.
The government will release the ₹70,000 crore to state-owned banks, which will allow for more credit and lower lending rates.
The banks have also been asked to pass on every fall in the cost of funds to the consumers. The government wants people to get cheaper loans for homes and cars as demand took a nosedive in recent months.
Government wants to make more money to be available for credit
The government will take steps to create a credit default swap market in India in consultation with the Reserve Bank of India and the Securities and Exchange Board of India.
A credit default swap (CDS) is a way for a lender to hedge against a loan turning bad. "For example, if a lender is worried that a borrower is going to default on a loan, the lender could use a CDS to offset or swap that risk. To swap the risk of default, the lender buys a CDS from another investor who agrees to reimburse the lender in the case the borrower defaults. Most CDS will require an ongoing premium payment to maintain the contract, which is like an insurance policy," according to Investopedia.
The government sets up a dedicated panel to make infrastructure development faster
An inter-ministerial task force will be set up to expedite the proposed government investments in infrastructure. The government had announced earlier that it would invest ₹100 lakh crore in infrastructure projects in the next five years.
"BS-IV vehicles purchased until March 30, 2020 will be allowed to run on the roads for the duration of the registration," the Finance Minister said.
Any vehicle will bought from now until March 2020 will be eligible for 30% depreciation, double that of the current rate of 15%. "That will largely benefit commercial vehicle segment. In the case of cars, only companies buying cars will benefit and that doesn't affect us," RC Bhargava, Chairman, Maruti Suzuki, the country's largest car maker told CNBC-TV18.
Government departments have been told to actively replace the old vehicles. Until now, there was a ban on the government offices from retiring their old vehicles as part of a cost control initiative.
The stimulus hopes to boost India's sluggish economy
Indian economy has slowed down sharply leading to millions of job As many as 30 million jobs in the textile sector and 350,000 people in the automobile sector have lost their jobs. However, the Finance Minister started her address citing the slowdown in economies around the world and highlighting that India is faring much better than many others.
The minister blamed the impact of
The slowdown in India has raised questions about the government's ability to meet its fiscal targets. However, the Finance Minister denied any pressure. "I have met tax authorities in three different places and I do not get the feeling that the tax collection targets are unrealistic," she said adding that the taxmen have been specifically told not to overreach and harass the taxpayer in a bid to meet their targets .
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